clny-20201231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K


☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-37980

COLONY CAPITAL, INC.

(Exact Name of Registrant as Specified in Its Charter)

Maryland

46-4591526

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

750 Park of Commerce Drive, Suite 210

Boca Raton, Florida 33487

(Address of Principal Executive Offices, Including Zip Code)

(561) 570-4644

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Class A Common Stock, $0.01 par value

CLNY

New York Stock Exchange

Preferred Stock, 7.50% Series G Cumulative Redeemable, $0.01 par value

CLNY.PRG

New York Stock Exchange

Preferred Stock, 7.125% Series H Cumulative Redeemable, $0.01 par value

CLNY.PRH

New York Stock Exchange

Preferred Stock, 7.15% Series I Cumulative Redeemable, $0.01 par value

CLNY.PRI

New York Stock Exchange

Preferred Stock, 7.125% Series J Cumulative Redeemable, $0.01 par value

CLNY.PRJ

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No ý

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-Accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. Yes ☐ No ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒ No ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2020 was approximately $1.14 billion. As of February 22, 2021, 492,149,296 shares of the Registrant's class A common stock and 733,931 shares of class B common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company’s Proxy Statement with respect to its 2020 Annual Meeting of Stockholders to be filed not later than 120 days after the end of the Company’s fiscal year ended December 31, 2020 are incorporated by reference into Part III of this Annual Report on Form 10-K.

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COLONY CAPITAL, INC.

FORM 10-K

TABLE OF CONTENTS


		Page
	PART I
Item 1.	Business	8
Item 1A.	Risk Factors	19
Item 1B.	Unresolved Staff Comments	56
Item 2.	Properties	56
Item 3.	Legal Proceedings	57
Item 4.	Mine Safety Disclosures	57

	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	58
Item 6.	Selected Financial Data	60
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	60
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	92
Item 8.	Financial Statements and Supplementary Data	93
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	93
Item 9A.	Controls and Procedures	94
Item 9B.	Other Information	97

	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	129
Item 11.	Executive Compensation	129
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	129
Item 13.	Certain Relationships and Related Transactions and Director Independence	129
Item 14.	Principal Accountant Fees and Services	129

	PART IV
Item 15.	Exhibits, Financial Statement Schedules	F-1
Item 16.	Form 10-K Summary

Exhibit Index
Signatures

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FORWARD-LOOKING STATEMENTS

Some of the statements contained in this Annual Report on Form 10-K (this "Annual Report") constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and we intend such statements to be covered by the safe harbor provisions contained therein. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions.

The forward-looking statements contained in this Annual Report reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from those expressed in any forward-looking statement. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:

•the duration and severity of the current novel coronavirus (COVID-19) pandemic, and its impact on the global market, economic and environmental conditions generally and in the digital and communications technology, wellness infrastructure and hospitality real estate, other commercial real estate equity and debt, and investment management sectors;

•the impact of COVID-19 on the Company's operating cash flows, debt service obligations and covenants, liquidity position and valuations of its real estate investments, as well as the increased risk of claims, litigation and regulatory proceedings and uncertainty that may adversely affect the Company;

•whether we will successfully execute our strategic transformation to become a digital infrastructure and real estate focused company within the timeframe contemplated or at all, and the impact of such transformation on the Company's legacy portfolios and assets, including whether such transformation will be consistent with the Company’s REIT status;

•our ability to obtain and maintain financing arrangements, including securitizations, on favorable or comparable terms or at all, including our ability to extend and/or replace our corporate credit facility;

•the Company's ability to complete anticipated monetizations of non-core assets within the timeframe and on the terms contemplated, if at all;

•the Company's ability to complete the pending exit of the Company's hospitality business within the timeframe and on the terms contemplated, if at all, and the amount of proceeds, if any, the Company will receive as a result of the exit after the impact of transaction costs and other transaction related expenses, including any required capital contributions to the hotel portfolios prior to closing;

•whether we will realize any of the anticipated benefits of the Company's pending exit from its hospitality business, if consummated;

•the impact of completed or anticipated initiatives related to our digital transformation, including the acquisitions of Digital Bridge Holdings, LLC and an ownership interest in Data Bridge Holdings, LLC, the strategic investment by Wafra, and the formation of certain other investment management platforms, on our company's growth and earnings profile;

•whether we will realize any of the anticipated benefits of our strategic partnership with Wafra, including whether Wafra will make additional investments in our Digital Other and Digital Operating segments;

•our ability to integrate and maintain consistent standards and controls, including our ability to manage our acquisitions in the digital industry effectively (such as Digital Bridge Holdings, LLC, Data Bridge Holdings, LLC and Vantage SDC);

•the impact to our business operations and financial condition of realized or anticipated compensation and administrative savings through cost reduction programs;

•our ability to redeploy any proceeds received from the sale of our non-digital or other legacy assets within the timeframe and manner contemplated or at all;

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•our business and investment strategy, including the ability of the businesses in which we have a significant investment (such as Colony Credit Real Estate, Inc. (NYSE:CLNC)) to execute their business strategies, particularly in light of the current COVID-19 pandemic;

•CLNC's trading price and its impact on the carrying value of the Company's investment in CLNC, including whether the Company will recognize further other-than-temporary impairments on such CLNC investment;

•performance of our investments relative to our expectations and the impact on our actual return on invested equity, as well as the cash provided by these investments and available for distribution;

•our ability to grow our business by raising capital for the companies that we manage;

•our ability to deploy capital into new investments consistent with our digital business strategies, including the earnings profile of such new investments;

•the impact of adverse conditions affecting a specific asset class in which we have investments;

•the availability of, and competition for, attractive investment opportunities;

•our ability to achieve any of the anticipated benefits of certain joint ventures, including any ability for such ventures to create and/or distribute new investment products;

•our ability to satisfy and manage our capital requirements;

•our expected hold period for our assets and the impact of any changes in our expectations on the carrying value of such assets;

•the general volatility of the securities markets in which we participate;

•stability of the capital structure of our wellness infrastructure and hospitality portfolios;

•changes in interest rates and the market value of our assets;

•interest rate mismatches between our assets and any borrowings used to fund such assets;

•effects of hedging instruments on our assets;

•the impact of economic conditions on third parties on which we rely;

•any litigation and contractual claims against us and our affiliates, including potential settlement and litigation of such claims;

•our levels of leverage;

•adverse domestic or international economic conditions, including those resulting from the COVID-19 pandemic, and the impact on the commercial real estate or real-estate related sectors;

•the impact of legislative, regulatory and competitive changes;

•actions, initiatives and policies of the U.S. and non-U.S. governments and changes to U.S. or non-U.S. government policies and the execution and impact of these actions, initiatives and policies, including regulations permitting or requiring forbearance of rent obligations and inhibiting the ability to pursue evictions and obtain late fees from non-paying tenants;

•whether we will maintain our qualification as a real estate investment trust for U.S. federal income tax purposes and our ability to do so;

•our ability to maintain our exemption from registration as an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”);

•changes in our board of directors or management team, and availability of qualified personnel;

•our ability to make or maintain distributions to our stockholders; and

•our understanding of our competition.

While forward-looking statements reflect our good faith beliefs, assumptions and expectations, they are not guarantees of future performance. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. Moreover, because we operate in a very competitive and rapidly changing environment, new risk factors are likely to emerge from time to time. We caution investors not to place undue reliance on these forward-looking

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statements and urge you to carefully review the disclosures we make concerning risks in Part I, Item 1A. “Risk Factors” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report. Readers of this Annual Report should also read our other periodic filings made with the Securities and Exchange Commission and other publicly filed documents for further discussion regarding such factors.

RISK FACTOR SUMMARY

Our business is subject to a number of risks, including risks that may prevent us from achieving our business

objectives or may adversely affect our business, financial condition, liquidity, results of operations and prospects. These

risks are discussed more fully in Item 1A. Risk Factors. These risks include, but are not limited to, the following:

Risks Related to Our Business Strategy

•Our ability to effectuate our digital transformation, including by monetizing legacy assets and simplifying our business operations.

•We may not successfully implement our diversified investment strategy or ultimately realize any of the anticipated benefits of diversification.

•Our business vision is to be a leading owner, operator and investment manager of digital infrastructure and real estate, which may adversely impact our stock price and our intent to maintain our REIT qualification.

•Pandemics or disease outbreaks, such as the current novel coronavirus (COVID-19) pandemic, have and the COVID-19 pandemic is expected to continue to, significantly disrupt, and may materially adversely impact, our business, financial condition and ability to execute on our business objectives.

Risks Related to Our Digital Business

•We require capital in order to continue to operate and grow our business, and the failure to obtain such capital, either through the public or private markets or other third party sources of capital, would have a material adverse effect on our business, financial condition, results of operations and ability to maintain our distributions to our stockholders.

•Adverse changes in general economic and political conditions could adversely impact our business, financial condition and results of operations.

▪The digital infrastructure and real estate industry is highly competitive and such competition may materially and adversely affect our performance and ability to execute our strategy.

•The investment management business is intensely competitive.

•Poor performance of our current and future managed investment vehicles could cause a decline in our revenue, income and cash flow.

•Investors in our current or future managed investment vehicles may negotiate less favorable terms to us than those of investment vehicles we currently manage, which could have a material adverse effect on our business, results of operations and financial condition.

•The organization and management of our current and future investment vehicles may create conflicts of interest.

•We may not realize the anticipated benefits of the Wafra strategic partnership.

•Any failure of our physical infrastructure or services could lead to significant costs and disruptions that could harm our business reputation and could adversely affect our earnings and financial condition.

•We do not directly control the operations of certain of our digital real estate assets and are therefore dependent on portfolio company management teams to successfully operate their businesses.

•The performance of our digital assets depends upon the demand for such assets.

•The infrastructure of the data centers that we own or expect to own may become obsolete, which could materially and adversely impact our revenue and operations.

•Digital infrastructure and real estate investments are subject to substantial government regulation.

Risks Related to our Organizational Structure and Business Operations

•There may be conflicts of interest between us and our Chief Executive Officer and certain other senior DBH employees that could result in decisions that are not in the best interests of our stockholders.

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•The occurrence of a security breach or a deficiency in our cybersecurity has the potential to disrupt our operations, cause material harm to our financial condition, result in misappropriation of assets, compromise confidential information and/or damage our business relationships.

Risks Related to Financing

•We may not be able to generate sufficient cash flow to meet all of our existing or potential future debt service obligations.

•Changes in the debt financing markets could negatively impact our ability to obtain attractive financing or re-financing for our investments and could increase the cost of such financing if it is obtained, which could lead to lower-yielding investments and potentially decrease our net income.

Risks Related to Ownership of Our Securities

•The market price of our class A common stock has been and may continue to be volatile and holders of our class A common stock could lose all or a significant portion of their investment due to drops in the market price of our class A common stock.

•We may issue additional equity securities, which may dilute your interest in us.

•The stock ownership limits imposed by the Code for REITs and our Charter may restrict our business combination opportunities.

Risks Related to Our Wellness Infrastructure Business

•We have significant leverage on our healthcare properties, which increases the risk of loss associated with our healthcare investments, impacts our liquidity and restricts our ability to engage in certain activities.

•We are directly exposed to operational risks at certain of our healthcare properties, which could adversely affect our revenue and operations.

•Failure to comply with certain healthcare laws and regulations could adversely affect our operations, expose us to liability and jeopardize our tenants/operators’ abilities to meet their obligations to us.

Risks Related to Our Hospitality Business

•We are subject to risks associated with our ongoing need for renovations and capital improvements at our hotel properties as well as financing these expenditures.

•We have significant leverage on our hotel properties, which increases the risk of loss associated with our hotel investments, impacts our liquidity and restricts our ability to engage in certain activities.

•There can be no assurance that the pending disposition of our hospitality business will be completed on the terms contemplated or at all or that we will be able to realize the anticipated benefits of such sale transaction.

Risks Related to Our Legacy Investment Management Business

•Certain of our management agreements with investment vehicles that are publicly-registered companies with the SEC are subject to limitation or termination, and any such termination could have a material adverse effect on our business, results of operations and financial condition.

•Our ownership of approximately 36% of CLNC, on a fully diluted basis, subjects us to various risks, any of which could have a material adverse effect on our business and results of operations.

Risks Related to Our Other Equity and Debt Business

•Our commercial real estate equity, debt and mortgage loans underlying our commercial real estate securities investments are subject to the risks typically associated with commercial real estate ("CRE").

Regulatory Risks

•Extensive regulation in the United States and abroad affects our activities, increases the cost of doing business and creates the potential for significant liabilities and that could adversely affect our business and results of operations.

Risks Related to Taxation

•The ability of our board of directors to revoke our REIT election without stockholder approval may cause adverse consequences to our stockholders.

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PART I

Item 1. Business.

In this Annual Report, unless specifically stated otherwise or the context indicates otherwise, the terms " the "Company," "we," "our" and "us" refer to Colony Capital, Inc. and its consolidated subsidiaries. References to the “Operating Partnership,” our “Operating Company” and the “OP” refer to Colony Capital Operating Company, LLC, a Delaware limited liability company and the operating company of the Company, and its consolidated subsidiaries.

Overview

We are a leading global investment firm with a focus on identifying and capitalizing on key secular trends in digital real estate. We are headquartered in Boca Raton, Florida, with key offices in Los Angeles, New York and London, and have approximately 350 employees in 14 locations across 9 countries.

We have elected to be taxed as a real estate investment trust ("REIT") for U.S. federal income tax purposes. We conduct our operations as a REIT, and generally are not subject to U.S. federal income taxes on our taxable income to the extent that we annually distribute all of our taxable income to stockholders and maintain qualification as a REIT, although we are subject to U.S. federal income tax on income earned through our taxable subsidiaries. We also operate our business in a manner that will permit us to maintain our exemption from registration as an investment company under the 1940 Act.

We conduct substantially all of our activities and hold substantially all of our assets and liabilities through our Operating Company. At December 31, 2020, we owned 90% of the Operating Company, as its sole managing member.

Our Business

Our vision is to establish the Company as a leading owner, operator and investment manager of digital infrastructure and real estate. We are currently the only global REIT that owns, manages, and/or operates across all major infrastructure components of the digital ecosystem including data centers, cell towers, fiber networks and small cells.

To execute this vision, the Company combined with Digital Bridge Holdings, LLC (“DBH”), an investment manager dedicated to digital real estate and infrastructure, in July 2019. As a result, the Company manages $29 billion of digital assets under management (“AUM”) and $13 billion of digital fee earning equity under management (“FEEUM”) across separately capitalized and managed portfolio companies and the Digital Colony Partners flagship funds (DCP I and DCP II), along with related co-investment accounts. Marc C. Ganzi, who co-founded DBH, became the Chief Executive Officer ("CEO") and President of the Company effective July 1, 2020. In connection with Mr. Ganzi’s appointment as the Company’s CEO and President, the Board of Directors of the Company (the "Board") appointed Mr. Ganzi to the Board, also effective as of July 1, 2020. Due to his multi-decade experience in building and acquiring digital companies and managing institutional capital, Mr. Ganzi is highly equipped to lead the Company’s strategic repositioning in becoming the leading platform for digital infrastructure and real estate. Further, the combination with DBH brings its world-class team of investment professionals and management of the DBH portfolio of high performing assets under the combined Digital Colony franchise. Thomas J. Barrack, Jr., who, prior to July 1, 2020, served as the Company’s CEO and President, continues to serve in his role as Executive Chairman of the Company and the Board. In addition, Jacky Wu was appointed as the Company’s Chief Financial Officer, effective July 1, 2020.

At December 31, 2020, the Company has $42 billion of total AUM and $20 billion of total FEEUM, managed on behalf of third party investors.

The Company conducts its business through five reportable segments as follows:

•Digital Investment Management ("Digital IM")—This business encompasses the investment and stewardship of third party capital in digital infrastructure and real estate. The Company's flagship opportunistic strategy is conducted through DCP and separately capitalized vehicles while other strategies, including digital credit and public equities, will be or are conducted through other investment vehicles. The Company earns management fees, generally based on the amount of assets or capital managed in investment vehicles, and have the potential to earn carried interest based on the performance of such investment vehicles subject to achievement of minimum return hurdles.

•Digital Operating—This business is composed of balance sheet equity interests in digital infrastructure and real estate operating companies, which generally earn rental income from providing use of space and/or capacity in or on digital assets through leases, services and other agreements. The Company currently owns interests in two companies: DataBank, an edge colocation data center business that acquired zColo's edge business in

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December 2020; and Vantage SDC. Both DataBank and Vantage are also portfolio companies, managed under Digital IM for the equity interests owned by third party capital.

•Digital Other—This segment is composed of equity interests in digital investment vehicles, the largest of which is the Company’s investment and commitment to the DCP flagship funds. This segment also includes the Company’s investment and commitment to the digital liquid strategies and seed investments for future digital investment vehicles.

•Wellness Infrastructure (previously referred to as Healthcare)—This segment is composed of a diverse portfolio of senior housing, skilled nursing facilities, medical office buildings, and hospitals. The Company earns rental income from senior housing, skilled nursing facilities and hospital assets that are under net leases to single tenants/operators and from medical office buildings which are both single tenant and multi-tenant. In addition, certain of the Company's senior housing properties are managed by operators under a RIDEA (REIT Investment Diversification and Empowerment Act) structure, which allows the Company to gain financial exposure to underlying operations of the facility in a tax efficient manner versus receiving contractual rent under a net lease arrangement.

•Other—This segment is composed of other equity and debt investments ("OED") and non-digital investment management business ("Other IM"). OED encompasses a diversified group of non-digital real estate and real estate-related equity and debt investments, including investments for which the Company acts as a general partner and/or manager ("GP co-investments") and receives various forms of investment management economics on related third-party capital on such investments, which includes our investment in a publicly traded REIT, Colony Credit Real Estate, Inc. (NYSE: CLNC), among other holdings. The Company has monetized a substantial portion of its OED portfolio and will continue to monetize the remainder as it completes its digital evolution. Other IM, which is separate from Digital IM, encompasses the Company’s management of private real estate credit funds and related co-investment vehicles, CLNC, and a public non-traded healthcare REIT, NorthStar Healthcare, Inc ("NorthStar Healthcare"). Many of the investments underlying these vehicles are co-owned by the Company’s balance sheet and categorized under OED. The Company earns management fees, generally based on the amount of assets or capital managed, and contractual incentive fees or potential carried interest based on the performance of the investment vehicles managed subject to achievement of minimum return hurdles.

Acceleration of Digital Transformation and COVID-19 Considerations

The world continues to face significant healthcare and economic challenges arising from the coronavirus disease 2019, or COVID-19, global pandemic. Efforts to address the pandemic, such as social distancing, closures or reduced capacity of retail and service outlets, hotels, factories and public venues, often mandated by governments, continue to have a significant impact on the global economy and financial markets across major industries, including many sectors of real estate. In particular, the Company and its investees' real estate investments in the hospitality, wellness infrastructure and retail sectors have experienced a myriad of challenges, including, but not limited to: significant declines in operating cash flows at the Company's hotel and wellness infrastructure properties, which in turn, affected the ability to meet debt service and covenant requirements on investment-level debt (non-recourse to the Company) and ability to refinance or extend upcoming maturities; flexible lease payment terms sought by tenants; incremental property operating costs such as labor and supplies in response to COVID-19; payment defaults on the Company's loans receivable; and a distressed market affecting real estate values in general. Such adverse impact may continue well beyond the containment of the COVID-19 pandemic. Furthermore, the COVID-19 crisis may also lead to heightened risk of litigation at the investment and corporate level, with an ensuing increase in litigation and related costs.

The sharp decline and volatility in equity and debt markets, and the economic recession due to COVID-19 have adversely affected the valuation of certain of the Company's financial assets carried at fair value, such as loans receivable, and also resulted in impairment of certain non-financial assets, in particular, non-digital real estate and equity method investments.

Additionally, the COVID-19 crisis has reinforced the critical role and the resilience of the digital real estate and infrastructure sector in a global economy that is increasingly reliant on digital infrastructure. Accordingly, in the second quarter of 2020, the Company determined to accelerate its shift to a digitally-focused strategy in order to better position the Company for growth. This digital transformation requires a rotation of the Company's non-digital assets into digital-focused investments. As a result, the Company shortened its assumptions of hold periods on its non-digital assets, in particular its hotel and wellness infrastructure assets, which significantly reduced the undiscounted future net cash flows to be generated by these assets below their carrying values at June 30, 2020. The shortfall in estimated future net cash flows from these assets was further exacerbated by the negative effects of COVID-19 on property operations and market values, as noted above. As a result, significant impairment was recognized in the second quarter of 2020 on the

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Company's hotel and wellness infrastructure assets. In the third quarter of 2020, as the Company expects to exit its hospitality business through a sale of its hotel assets (as discussed further below), additional write-downs were recorded to align the hotel carrying values to the agreed upon selling price. The acceleration of the Company's digital transformation and the overall reduction in value of the Company's non-digital balance sheet also caused a shortfall in the fair value of the Company's other investment management reporting unit over its carrying value, resulting in significant impairment to the other investment management goodwill in the second quarter of 2020.

The various impairment and fair value decreases as a result of the acceleration of the Company's digital transformation collectively accounted for $3.2 billion of charges in 2020, of which $2.5 billion was attributable to the OP. These amounts are reflected within impairment loss, other loss, equity method losses and within impairment loss in discontinued operations on the statement of operations, as discussed further in Item 15. "Exhibits and Financial Statement Schedules" of this Annual Report.

The Company believes that it has materially addressed overall recoverability in value in its financial statements across all of its non-digital assets as of December 31, 2020, applying the Company's best estimates and assumptions at this time based upon external factors known to date and the Company's expected digital transformation timeline. If the extent and duration of the economic effects of COVID-19 negatively affect the Company's financial condition and results of operations beyond the Company's current projections, the estimates and assumptions currently applied by the Company may change, which may lead to further impairment and fair value decreases in its non-digital assets that could be material in the future.

In light of the Company's strategy to accelerate its digital transformation, the Company will continue to evaluate whether it will maintain REIT status for 2021 or future years.

Exit of the Hospitality Business

In September 2020, the Company entered into a definitive agreement with a third party to sell five of the six hotel portfolios in its Hospitality segment and its 55.6% interest in a portfolio of limited service hotels that were acquired through a consensual foreclosure in July 2017 (the "THL Hotel Portfolio"), in the Other segment, composed of 197 hotel properties in aggregate. The remaining portfolio in the Hospitality segment is in receivership and the remaining interests in the THL Hotel Portfolio will continue to be held by investment vehicles managed by the Company. Two of the hotel portfolios that are being sold in the Hospitality segment are held through joint ventures in which the Company holds a 90% and a 97.5% interest, respectively. The aggregate gross proceeds of $67.5 million, subject to certain adjustments as provided in the sale agreement, as amended, represents a transaction value of approximately $2.8 billion, with the acquirer's assumption of $2.7 billion of investment-level debt. Consummation of the sale is subject to customary closing conditions, including but not limited to, acquirer’s assumption of the outstanding mortgage notes encumbering the hotel properties and third party approvals. In October 2020 and February 2021, the parties amended the sale agreement to address certain payments made or that may be made by the Company to lenders or otherwise in connection with the hospitality portfolios, and, subject to the satisfaction of certain conditions, to provide the Company with a purchase price credit for a portion of such funded amounts. The sale is expected to close in the first half of 2021. There can be no assurance that the sale will close in the timeframe contemplated or on the terms anticipated, if at all.

The Company’s pending exit from the hospitality business represents a key milestone in its digital transformation. Accordingly, the sale of these hotel portfolios is a strategic shift that will have a significant effect on the Company’s operations and financial results, and has met the criteria as held for sale and discontinued operations. For all current and prior periods presented, the related assets and liabilities are presented as assets and liabilities held for disposition on the consolidated balance sheets and the related operating results are presented as loss from discontinued operations on the consolidated statements of operations (refer to Item 15. "Exhibits and Financial Statement Schedules" of this Annual Report).

Investment Strategy

We plan to invest in digital infrastructure and real estate assets in which we have a competitive advantage with our experience and track record in this sector, and which possess a durable cash flow profile with compelling secular growth characteristics driven by key themes such as 5G, artificial intelligence and cloud-based applications. We believe our deep understanding of commercial real estate and digital infrastructure, together with our extensive experience running mission-critical network infrastructure for some of the world's largest and most-profitable companies, will provide us with a significant advantage in identifying and executing on attractive opportunities through various economic cycles.

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We believe we can achieve our business objective of delivering attractive risk-adjusted returns through our rigorous underwriting and asset management processes, which benefit from our deep operational and investment experience in commercial real estate and digital infrastructure, having invested in and run digital infrastructures businesses through multiple economic cycles. These processes allow us to implement a flexible yet disciplined investment strategy for our balance sheet and for the companies and funds we manage on behalf of third parties. Core strengths and principles of our investment strategy include:

•People—Established operators, investors and thought leaders with over two decades of experience in towers, data centers, fiber and small cells

•Best-in-class assets—Own mission-critical and hard-to-replicate network infrastructure supporting many of the largest and most-profitable companies in the world and typically with very high renewal rates and pricing; Digital Colony has already successfully constructed a portfolio of best-in-class assets within its investment management business across all components of the digital ecosystem to drive significant synergies

•Disciplined framework

•Four corners of asset selection—(i) market dynamics, with a focus on stable markets with catalysts for near-term digital infrastructure investment and downside protection for asset owners, (ii) asset quality, with a focus on unique, hard-to-replicate assets and assets that provide mission critical services to customers with high switching costs, (iii) contract quality, with a focus on long-term contracts with investment grade customers and build in maximum flexibility to add additional tenants, and (iv) management or platform potential, with an emphasis on buy and build strategies with initial investments used as a platform to drive growth organically and through acquisitions

•Alpha creation—Drive outperformance through human capital decisions, direct operating experience, proprietary back-office systems, differentiated merger and acquisitions program and dynamic balance sheet management

•Operational excellence—Emphasis on strong organic leasing growth, extensive greenfield development expertise, and the highest environmental, social and governance ("ESG") standards

•Proprietary deal flow—Focus on compelling proprietary investment opportunities in brownfield, greenfield and new white sheet business plans and carveouts that avoid competitive auctions, facilitating lower entry multiples

•Products—Provide flexible and creative solutions across the capital structure to digital real estate and infrastructure companies around the world

•Prudent leverage—Structuring transactions with the appropriate amount of leverage, if any, based on the risk, duration and structure of cash flows of the underlying asset

Our investment strategy is dynamic and flexible, which enables us to adapt to shifts in economic, real estate and capital market conditions and to exploit inefficiencies around the world. Consistent with this strategy, in order to capitalize on the investment opportunities that may be present in various points of an economic cycle, we may expand or change our investment strategy or target assets over time as appropriate.

Financing Strategy

Our financing strategy in general is to favor investment-specific financing principally on a non-recourse basis including securitizations, and then corporate financing, which is generally recourse to the Company or the Company’s assets. We seek to match terms and currencies, as available and applicable, and the amount of leverage we use is based on our assessment of a variety of factors, including, among others, the anticipated liquidity and price volatility of the assets in our investment portfolio, the potential for losses and extension risk in our portfolio, the ability to raise additional equity to reduce leverage and create liquidity for future investments, the availability of credit at favorable prices or at all, the credit quality of our assets, our outlook for borrowing costs relative to the income earned on our assets and financial covenants within our credit facilities.

Our decision to use leverage to finance our assets is at our discretion and not subject to the approval of our stockholders. To the extent that we use leverage in the future, we may mitigate interest rate risk through utilization of hedging instruments, primarily interest rate swap and cap agreements, to serve as a hedge against future interest rate increases on our borrowings. Refer to "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for discussion of our liquidity needs and sources of liquidity.

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Risk Management

Risk management is a significant component of our strategy to deliver consistent risk-adjusted returns to our stockholders. The audit committee of our board of directors, in consultation with our chief risk officer, internal auditor and management, maintains oversight of risk management matters, and periodically reviews our policies with respect to risk assessment and risk management, including key risks to which we are subject, including credit risk, liquidity risk, financing risk, foreign currency risk and market risk, and the steps that management has taken to monitor and control such risks.

Underwriting and Investment Process

In connection with executing any new investment in digital assets for our balance sheet or a managed investment vehicle, our underwriting team undertakes a comprehensive due diligence process to ensure that we understand all of the material risks involved with making such investment, in addition to related accounting, legal, financial and business issues. If the risks can be sufficiently mitigated in relation to the potential return, we will pursue the investment on behalf of our balance sheet and/or investment vehicles, subject to approval from the applicable investment committee, composed of senior executives of the Company.

Specifically, as part of our underwriting process, we evaluate and review the following data, including, but not limited to: financial data including historical and budgeted financial statements, tenant or customer quality, lease terms and structure, renewal probability, capital expenditure plans, sales pipeline, technical/energy requirements and supply, local and macroeconomic market conditions, ESG, leverage and comparable transactions, as applicable. For debt investments, we also analyze metrics such as loan-to-collateral value ratios, debt service coverage ratios, debt yields, sponsor credit ratings and performance history.

In addition to evaluating the merits of any particular proposed investment, we evaluate the diversification of our or a particular managed investment vehicle’s portfolio of assets, as the case may be. Prior to making a final investment decision, we determine whether a target asset will cause the portfolio of assets to be too heavily concentrated with, or cause too much risk exposure to, any one digital real estate sector, geographic region, source of cash flow such as tenants or borrowers, or other geopolitical issues. If we determine that a proposed investment presents excessive concentration risk, we may decide not to pursue an otherwise attractive investment.

Allocation Procedures

We currently manage, and may in the future manage, private funds, REITs and other entities that have investment and/or rate of return objectives similar to our own or to other investment vehicles that we manage. In order to address the risk of potential conflicts of interest among us and our managed investment vehicles, we have implemented an investment allocation policy consistent with our duty as a registered investment adviser to treat our managed investment vehicles fairly and equitably over time. Pursuant to this policy, and subject to certain priority rights in our DCP funds, investment allocation decisions are based on a suitability assessment involving a review of numerous factors, including the particular source of capital’s investment objectives, available cash, diversification/concentration, leverage policy, the size of the investment, tax, anticipated pipeline of suitable investments and fund life.

Portfolio Management

The comprehensive portfolio management process generally includes day-to-day oversight by the Company's portfolio management team, regular management meetings and quarterly asset review process. These processes are designed to enable management to evaluate and proactively identify investment-specific issues and trends on a portfolio-wide basis for both assets on our balance sheet and assets of the companies within our investment management business. Nevertheless, we cannot be certain that such review will identify all issues within our portfolio due to, among other things, adverse economic conditions or events adversely affecting specific assets; therefore, potential future losses may also stem from investments that are not identified during these reviews.

We use many methods to actively manage our risk to preserve our income and capital, including, but not limited to, maintaining dialogue with tenants, operators, partners and/or borrowers and performing regular inspections of our collateral and owned properties. With respect to our wellness infrastructure properties, we consider the impact of regulatory changes on operator performance and property values. During a quarterly review, or more frequently as necessary, investments are monitored and identified for possible asset impairment or loan loss reserves, as applicable, based upon several factors, including missed or late contractual payments, significant declines in property operating performance and other data which may indicate a potential issue in our ability to recover our invested capital from an investment. In addition, we may utilize services of certain strategic partnerships and joint ventures with third parties with relevant expertise to assist our portfolio management.

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In order to maintain our qualification as a REIT for U.S. federal income tax purposes and our exemption from registration under the 1940 Act, and maximize returns and manage portfolio risk, we may dispose of an asset earlier than anticipated or hold an asset longer than anticipated if we determine it to be appropriate depending upon prevailing market conditions or factors regarding a particular asset. We can provide no assurances, however, that we will be successful in identifying or managing all of the risks associated with acquiring, holding or disposing of a particular asset or that we will not realize losses on certain assets.

Interest Rate and Foreign Currency Hedging

Subject to maintaining our qualification as a REIT for U.S. federal income tax purposes and our exemption from registration under the 1940 Act, we may mitigate the risk of interest rate volatility through the use of hedging instruments, such as interest rate swap agreements and interest rate cap agreements. The goal of our interest rate management strategy is to minimize or eliminate the effects of interest rate changes on the value of our assets, to improve risk-adjusted returns and, where possible, to lock in, on a long-term basis, a favorable spread between the yield on our assets and the cost of financing such assets. In addition, because we are exposed to foreign currency exchange rate fluctuations, we employ foreign currency risk management strategies, including the use of, among others, currency hedges, and matched currency financing. We can provide no assurances, however, that our efforts to manage interest rate and foreign currency exchange rate volatility will successfully mitigate the risks of such volatility on our portfolio.

Competition

As an investment manager with significant balance sheet investments, we primarily compete for capital from outside investors and in our pursuit and execution of attractive investments on behalf of our balance sheet and investment funds.

The ability to source capital from outside investors will depend on our reputation, investment track record, pricing and terms for the management of capital, and market environment for capital raising, among other factors. We compete with other investment managers focused on or active in digital real estate and infrastructure including other private equity sponsors, credit and hedge fund sponsors and REITs, who may have greater financial resources, longer track records, more established relationships and more attractive fund terms, including fees.

The ability to transact on attractive investments will depend on execution reputation, capital availability, tolerance for risk, cost of capital, number of potential buyers and pricing, among other factors. We face competition from a variety of institutional investors, including other REITs, investment managers of private equity, infrastructure, credit, hedge and other funds, specialty finance companies, commercial and investment banks, commercial finance and insurance companies, and other financial institutions. Some of these competitors may have greater financial resources, access to lower cost of capital and access to funding sources that may not be available to the Company. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments, or pay higher prices, than we can. Furthermore, some of our competitors are not subject to the operating constraints associated with REIT compliance or maintenance of an exemption from the 1940 Act.

Also, competition in the markets in which our properties operate from existing or newly renovated properties could adversely affect the operating performance of our properties, and thus our financial results. Competition may also require us to make capital improvements or incur additional costs that we otherwise might not choose to make, which may adversely affect the profitability of our properties.

We also face competition in the recruitment and retention of qualified and skilled personnel. Our ability to continue to compete effectively in our businesses will depend upon our ability to attract new employees and retain and motivate our existing employees.

An increase in competition across the various components of our business may limit our ability to generate attractive risk-adjusted returns for our stockholders, thereby adversely affecting the market price of our common stock.

Seasonality

Other than the operations of our hotel business which is currently pending disposition, we generally do not experience any pronounced seasonality in our business.

Regulations

REIT Qualification

We have elected to be taxed as a REIT for U.S. federal income tax purposes. So long as we qualify as a REIT, we generally will not be subject to U.S. federal income tax at the REIT-level on our REIT taxable income that we distribute

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currently to our stockholders. Our qualification as a REIT depends upon our ability to meet, on a continuing basis, various complex requirements under the Internal Revenue Code of 1986, as amended (the "Code"), relating to, among other things, the sources of our gross income and the composition and values of our assets (which, based on the types of assets we own, can fluctuate rapidly, significantly and unpredictably), our distribution levels and the diversity of ownership of our shares. In addition, we hold certain of our assets through taxable REIT subsidiaries (each a "TRS"), which are subject to U.S. federal and applicable state and local income taxes (and any applicable non-U.S. taxes) at regular corporate rates. Due to the nature of the assets in which we invest and our investment management business, our TRSs may have a material amount of assets and net taxable income. In light of the Company's strategy to accelerate its digital transformation, the Company will continue to evaluate whether it will maintain REIT status for 2021 or future years.

Investment Company Act of 1940

We conduct our operations so that we and our subsidiaries are not required to register as an investment company under the 1940 Act. Section 3(a)(1)(A) of the 1940 Act defines an investment company as any issuer that is or holds itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. Section 3(a)(1)(C) of the 1940 Act defines an investment company as any issuer that is engaged in, or proposes to engage in, the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of the issuer’s total assets (exclusive of U.S. Government securities and cash items) on an unconsolidated basis. Excluded from the definition of investment securities under the 1940 Act, among other things, are U.S. Government securities and securities issued by majority owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the 1940 Act, which relate to “private” investment companies.

We hold ourselves out as a real estate investment management firm. We do not propose to engage primarily in the business of investing, reinvesting or trading in securities. We are organized as a holding company that conducts its businesses primarily through wholly owned or majority owned subsidiaries. We are primarily engaged in owning and leasing real estate assets and managing investments for other entities that own real estate assets. The assets of certain of our subsidiaries may be deemed to consist primarily of investment securities, but we believe that many of these subsidiaries will qualify for an exception from the definition of investment company under Section 3(c)(5)(C) or Section 3(c)(6) of the 1940 Act. Section 3(c)(5)(C) provides an exception for entities “primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” Section 3(c)(6) provides an exception for entities that are primarily engaged, directly or through majority owned subsidiaries, in, among other things, the business of purchasing mortgages or other real estate interests. We intend to monitor our holdings to ensure ongoing compliance with the 40% test referred to above. In addition, we believe we are not an investment company under Section 3(a)(1)(A) of the 1940 Act because we do not and will not engage primarily, or hold ourselves out as being engaged primarily, in the business of investing, reinvesting or trading in securities. Rather, through our wholly owned and majority owned subsidiaries, we are primarily engaged in the non-investment company businesses of these subsidiaries. Continuing qualification for exemption from registration under the 1940 Act will limit our ability to make certain investments.

If we or our subsidiaries fail to maintain an exception or exemption from the 1940 Act, we may be required to, among other things: (i) substantially change the manner in which we conduct our operations to avoid being required to register as an investment company under the 1940 Act; or (ii) register as an investment company under the 1940 Act. Either of (i) or (ii) could have an adverse effect on us and the market price of our securities. If we were required to register as an investment company under the 1940 Act, we would become subject to substantial regulation with respect to our capital structure (including our ability to use leverage), management, operations, transactions with affiliated persons (as defined in the 1940 Act), portfolio composition, including restrictions with respect to diversification and industry concentration, and other matters.

Regulation under the Investment Advisers Act of 1940

We have subsidiaries that are registered with the Securities and Exchange Commission (the "SEC") as investment advisers under the Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"). As a result, we are subject to the anti-fraud provisions of the Investment Advisers Act and to applicable fiduciary duties derived from these provisions that apply to our relationships with the investment vehicles that we manage. These provisions and duties impose restrictions and obligations on us with respect to our dealings with our investors and our investments, including, for example, restrictions on agency, cross and principal transactions. We, or our registered investment adviser subsidiaries, will be subject to periodic SEC examinations and other requirements under the Investment Advisers Act and related regulations primarily intended to benefit advisory clients. These additional requirements relate, among other things, to maintaining an effective and comprehensive compliance program, recordkeeping and reporting requirements and disclosure requirements. The Investment Advisers Act generally grants the SEC broad administrative powers,

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including the power to limit or restrict an investment adviser from conducting advisory activities in the event it fails to comply with federal securities laws. Additional sanctions that may be imposed for failure to comply with applicable requirements include the prohibition of individuals from associating with an investment adviser, the revocation of registrations and other censures and fines.

U.S. Healthcare Regulation—Overview

Assisted living, memory care, independent living, hospitals, skilled nursing facilities and other healthcare providers that operate healthcare properties in our portfolio are subject to extensive federal, state and local laws, regulations and industry standards governing their operations. Failure to comply with any of these, and other laws, could result in loss of licensure; loss of certification or accreditation; denial of reimbursement; imposition of civil and/or criminal penalties and fines; suspension or exclusion from federal and state healthcare programs; or closure of the facility. Although the properties within our portfolio may be subject to varying levels of governmental scrutiny, we expect that the healthcare industry, in general, will continue to face increased regulation and pressure in the areas of fraud and abuse and privacy and security, among others. We also expect that efforts by third-party payors, such as the federal Medicare program, state Medicaid programs and private insurers, to impose greater and more stringent cost controls upon operators will intensify and continue. Changes in laws, regulations, reimbursement, and enforcement activity can all have a significant effect on the operations and financial condition of our tenants, operators and managers, which in turn may adversely impact us, as set forth below and under "Item 1A. Risk Factors” in this Annual Report.

Healthcare Fraud and Abuse Enforcement

Healthcare providers are subject to federal and state laws and regulations that govern their operations and, in some cases, arrangements with referral sources. These laws include those that require providers to furnish only medically necessary services and submit to third-party payors valid and accurate statements for each service, as well as kickback laws, self-referral laws and false claims acts. In particular, enforcement of the federal False Claims Act has resulted in increased enforcement activity for healthcare providers and can involve significant monetary damages and awards to private plaintiffs who successfully bring “whistleblower” lawsuits. Sanctions for violations of these laws, regulations, and other applicable guidance may include, but are not limited to, loss of licensure, loss of certification or accreditation, denial of reimbursement, imposition of civil and/or criminal penalties and fines, suspension or exclusion from federal and state healthcare programs or closure of the facility; any of which could have a material adverse effect on the operations and financial condition of our tenants, operators and managers, which in turn may adversely impact us.

Healthcare Reform

The Patient Protection and Affordable Care Act of 2010, or ACA, impacted the healthcare marketplace by decreasing the number of uninsured individuals in the United States through the establishment of health insurance exchanges to facilitate the purchase of health insurance, expanded Medicaid eligibility, subsidized insurance premiums and included requirements and incentives for businesses to provide healthcare benefits. The ACA remains subject to continuing legislative, administrative and judicial challenge and scrutiny, and could be amended, modified or invalidated in whole or in part at any time.

The US Department of Health and Human Services and its agency that oversees much of the ACA, the Centers for Medicare and Medicaid Services (CMS) have substantially revised a number of ACA-related regulations, which have altered financial support for health plans, enrollment operations and individuals seeking to purchase insurance. CMS also has allowed new insurance options offering less coverage to compete in the market. These changes and other market dynamics are associated with declining enrollment and increased numbers of uninsured and under-insured individuals in recent years. Further, CMS has approved waivers permitting states to alter state Medicaid programs by, among other things, requiring individuals to meet certain requirements, like work requirements, in order to maintain eligibility for Medicaid (although some of these waivers have subsequently been challenged in court). The new Administration may seek to revise many of these regulatory and subregulatory actions. In the meantime, these and other actions continue to impact the insurance markets and reduce the number of individuals purchasing insurance or qualifying for Medicaid and may negatively impact the operations and financial condition of our tenants, operators and managers, which in turn may adversely impact us. If the new Administration and Congress seek different policy directions, those changes could strengthen the ACA and positively impact enrollment experience, but these changes nonetheless could cause disruption in the marketplace, which could negatively impact the operations and financial condition of our tenants, operators, and managers, which in turn may adversely impact us.

In 2017, Congress enacted legislation eliminating the tax penalty for individuals who do not purchase insurance after it unsuccessfully sought to replace substantial parts of the ACA with different mechanisms for facilitating insurance coverage in the commercial and Medicaid markets. Based in part on this change, on December 14, 2018, a U.S. District

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Court in Texas ruled the ACA unconstitutional in its entirety. The case is now pending before the US Supreme Court. Should lower court rulings be upheld in whole or in part, it could dramatically change U.S. healthcare regulation in numerous ways and may potentially spur congressional action, making the ultimate consequences of the ruling difficult to predict. Should the ruling be upheld and implemented, the immediate effects would include reduced access to health coverage through: (1) reduced Medicaid eligibility, (2) the disestablishment of health insurance exchanges and accompanying subsidized premiums, and (3) no requirement for businesses to provide health insurance. Amendments, including certain waivers to healthcare fraud and abuse laws made by the ACA would also be void, which could change the enforcement posture of federal regulators. Current healthcare reimbursement standards, including those discussed below, are predicated, in part, on changes made by the ACA and implementation of this ruling would create significant uncertainty regarding the legality of such standards and what standards are in effect absent the ACA. The effects of this ruling could adversely affect the operations and financial condition of our tenants and operators, which in turn may adversely impact us.

Healthcare Reimbursement

Federal, state and private payor reimbursement methodologies applied to healthcare providers are continuously evolving. Federal and state healthcare financing authorities are continuing to implement new or modified reimbursement methodologies that shift risk to healthcare providers and generally reduce payments for services, which may negatively impact healthcare property operations. Additionally, Congress and the new presidential administration could substantially change the health insurance industry and payment systems. The impact of any such changes, if implemented, may result in an adverse effect on our tenants, managers and operators, which in turn may adversely impact us.

Skilled nursing facilities and hospitals typically receive most of their revenues from the Medicare and Medicaid programs, with the balance representing reimbursement payments from private payors, including private insurers and self-pay patients. Senior housing facilities (assisted living, independent living and memory care facilities) typically receive most of their revenues from private pay sources and a small portion of their revenue from the Medicaid program. Providers that contract with government and private payors may be subject to periodic pre- and post-payment reviews and other audits. A review or audit of a property operator’s claims could result in recoupments, denials or delay of payments in the future, each of which could have a significant negative financial impact on such property. In some instances, a property operator may be removed and barred from participating on one or more federal or state programs, which can have a debilitating impact on cash flow, revenue expectations and ultimately, viability. Any development that compromises the financial viability of a tenant negatively impacts us. Additionally, there can be no guarantee that a third-party payor will continue to reimburse for services at current levels or continue to be available to residents of our facilities. Rates generated at facilities will vary by payor mix, market conditions and resident acuity. Rates paid by self-pay residents are set by the facilities and are determined by local market conditions and operating costs.

•Medicare Reimbursement—Medicare is a significant payor source for our skilled nursing facilities and hospitals. Skilled nursing facilities and hospitals are reimbursed by Medicare under prospective payment systems; payment to a tenant under these Medicare payment systems varies based upon the type of facility, geographic location and service furnished, among other things. Under these payment systems, providers typically receive fixed fees for defined services, which create a risk that payments will not cover the costs of delivering care. In addition, CMS continues to focus on linking payment to performance relative to quality and other metrics, including performance of up- and downstream, unrelated providers, and bundling payments for multiple items and services in a way that shifts more financial risk to providers. These changes, and a facility’s ability to conform to them, could reduce payments and patient volumes for some facilities, including our tenants and operators, which may in turn adversely impact us. Furthermore, while CMS has previously tested some of these new payment principles through optional “models,” CMS could adopt rules making certain detrimental payment policies broadly applicable and mandatory. The new presidential administration could propose additional unanticipated changes to the amount and manner in which healthcare providers are paid, and these changes also could have a material adverse effect on payments and patient volumes for some facilities.

◦Skilled Nursing Conditions for Participation—On October 4, 2016, CMS published a final rule to make major changes to improve the care and safety of residents in long-term care facilities that participate in the Medicare and Medicaid programs. The policies in this final rule were targeted at reducing unnecessary hospital readmissions and infections, improving the quality of care, and strengthening safety measures for residents in these facilities. The regulations were effective on November 28, 2016, but CMS has been implementing the regulations using a phased approach, with Phase 1 of the regulations implemented on November 28, 2016 and Phase 2 of the regulations implemented on November 28, 2017. Phase 3 of the regulations were to be implemented on November 28, 2019, but CMS proposed substantial changes in July 2019. Those changes have not been finalized yet. In the meantime, Phase 3 has not been implemented. Failure of our tenants and

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operators to comply with the new regulations could have an adverse impact the operations and financial condition of our tenants and operators, which in turn may adversely impact us.

◦Skilled Nursing—In August 2018, CMS adopted a revised methodology used to compensate skilled nursing facilities for therapy services, which changes the core basis of reimbursement from duration of services provided to reimbursement based on anticipated patient needs; these changes took effect on October 1, 2019. A tenant or operator of a skilled nursing facility’s ability to conform to these changes could positively or negatively impact the facility’s revenue, which in turn may adversely impact us.

•Medicaid Reimbursement—Medicaid is also a significant payor source for our skilled nursing facilities and hospitals. The federal and state governments share responsibility for financing Medicaid. Within certain federal guidelines, states have a fairly wide range of discretion to determine Medicaid eligibility and reimbursement methodology. In recent years, CMS embraced a more flexible approach to state amendments and waivers that allow states even more latitude to determine eligibility and reimbursement. Certain states are attempting to slow the rate of growth in Medicaid expenditures by freezing rates or restricting eligibility and benefits; some states have elected not to expand their Medicaid eligibility criteria pursuant to the ACA. Some states have pursued block grant arrangements with CMS, which cap overall federal financial participation, and incentivize the state to reduce Medicaid expenditures. Some states are transitioning their Medicaid programs to managed care models, which rely on networks of contracted providers to provide services at reduced negotiated rates to a higher volume of patients than they might see absent the contract. Such changes may reduce the volume of Medicaid patients at facilities that do not participate in the managed care plan’s network. Facilities that do participate may not receive a sufficient increase in patient volume to offset their lowered reimbursement rates. States and the federal government are also examining ways to further align Medicaid reimbursement with quality metrics and other value-based payment models that might shift risk to or place additional compliance costs on facilities. The new Administration may seek to revisit some of these flexibilities and trends, which could further disrupt state Medicaid regimes and adversely affect providers. In some states, our tenants and operators could experience delayed or reduced payment for services furnished to Medicaid enrollees, which in turn may adversely impact us. Further, as noted above, ongoing litigation regarding the ACA and Medicaid waivers may also affect Medicaid coverage and reimbursement.

Healthcare Licensure, CON, Certification and Accreditation

Hospitals, skilled nursing facilities, senior housing facilities and other healthcare providers that operate healthcare properties in our portfolio may be subject to extensive state licensing and certificate of need, or CON, laws and regulations, which may restrict the ability of our tenants and operators to add new properties, expand an existing facility’s size or services, or transfer responsibility for operating a particular facility to a new tenant, operator or manager. The failure of our tenants and operators to obtain, maintain or comply with any required license, CON or other certification, accreditation or regulatory approval (which could be required as a condition of third-party payor reimbursement) could result in loss of licensure, loss of certification or accreditation, denial of reimbursement, imposition of civil and/or criminal penalties and fines, suspension or exclusion from federal and state healthcare programs, or closure of the facility; any of which could have an adverse effect on the operations and financial condition of our tenants, operators and managers, which in turn may adversely impact us.

Health Information Privacy and Security

Healthcare providers, including those in our portfolio, are subject to numerous state and federal laws that protect the privacy and security of patient health information. The federal government, in particular, has significantly increased its enforcement of these laws. The failure of our tenants, operators and managers to maintain compliance with privacy and security laws could result in the imposition of penalties and fines, which in turn may adversely impact us.

For additional information regarding regulations applicable to the Company, refer to "Item 1A. Risk Factors.”

Human Capital Resources

We believe that our people are our most important asset. We are focused on fostering a diverse workforce with different perspectives, experiences, and backgrounds to encourage innovative and creative ideas, and ultimately lead to our collective success.

Diversity and Inclusion

We have established a Diversity, Equity and Inclusion steering committee, which establishes and monitors progress on our diversity hiring and retention goals.

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We recognize that a diverse investment team enhances our ability to source, evaluate and manage a differentiated set of investment opportunities within the digital infrastructure sector. We also support our portfolio company management teams, many of whom come from diverse backgrounds, to create and/or augment existing diversity and inclusion initiatives. We have created a four pillar program to facilitate the composition of a diverse workforce reflective of the constituencies and communities we serve, which focuses on the following:

Mentorships: We have partnered with Knowledge is Power Program (KIPP), an organization that reaches out to diverse candidates early in their careers to educate and mentor the next generation of talent. Through KIPP, our employee volunteers provide one-on-one mentorship to support these candidates through the college application process.

Internships: We have developed a 2021 internship program to help build a talent pipeline of diverse candidates for investment professional positions, committing to hiring at least 50% diverse candidates, including through organizations such as Seizing Every Opportunity (SEO), Toigo, and One Search Young Women in Finance (UK).

Recruiting/Hiring: A particular focus of the Company recently has been to improve the gender diversity of our investment team. In addition to recent female hires at senior positions within the digital investment management business, nearly 40% of all digital-focused hires at the associate level since our digital transformation commenced have been female.

Career Path/Rewards: We believe that cultivating diversity at more junior levels within our organization, coupled with ensuring our employees have opportunities to excel and grow in their careers at Colony, will strengthen our ability to foster diversity at more senior levels. Many of our professionals have been promoted from within and, as the diversity of our junior professionals continues to grow, we expect to see even greater diversity across the senior levels of the Company.

In addition, our dedication to fostering diversity and inclusion is also supported by our Company’s board of directors, four out of its 11 members are female and/or people of color/minorities.

Compensation and Benefits Program

Our compensation program is designed to attract and reward talented individuals who possess the skills necessary to support our business objectives, assist in the achievement of our strategic goals and create long-term value for our stockholders. We provide employees with compensation packages that include base salary, annual incentive bonuses tied to specific performance goals, and, generally for all mid-level and above employees, long-term equity awards tied to time-based vesting conditions and the relative value of our stock price as compared to our peers. We believe that a compensation program with both short-term and long-term awards provides fair and competitive compensation and aligns employee and stockholder interests, including by incentivizing business and individual performance (pay for performance), motivating based on long-term company performance and integrating compensation with our business plans. We commission a customized compensation benchmark survey annually to ensure our compensation packages are competitive and in-market. In addition, we also offer employees benefits such as life and health (medical, dental and vision) insurance, paid time off, paid parental leave, charitable gift matching, student loan paydown program and a 401(k) plan.

Community Involvement

We aim to give back to the communities where we live, work and operate by participating in local, national and global causes, and believe that this commitment helps in our efforts to attract and retain employees. Our employees serve as the ambassadors of our social responsibility values, which they share through volunteering and charitable giving.

We also recognize that the sheer scope and reach of the technology and networks we own give us the power to touch lives around the world. We established a long-term partnership with Télécoms Sans Frontières (TSF), which provides new technologies for rapid response, capacity building, education, protection and assistance to bridge the digital divide across isolated communities.

At December 31, 2020, we had approximately 350 employees, of which approximately 80% were in the U.S. with the remaining in our international locations. Other than our international employees, none of our U.S. employees are represented by a labor union or covered by a collective bargaining agreement. As we continue to execute on our accelerated digital transformation, we expect our hiring efforts to be focused on our digital business.

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Available Information

Our website address is www.clny.com. Information contained on our website is not incorporated by reference into this Annual Report and such information does not constitute part of this report and any other report or documents the Company files with or furnishes to the SEC.

Our annual reports on Form 10-K (including this Annual Report), quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and any amendments thereof are available on our website under “Shareholders—SEC Filings,” as soon as reasonably practicable after they are electronically filed with or furnished to the SEC, and may be viewed at the SEC’s website at www.sec.gov. Copies are also available without charge from Colony Capital Investor Relations. Information regarding our corporate governance, including our corporate governance guidelines, code of ethics and charters of committees of the Board of Directors, are available on our website under “Shareholders—Corporate Governance,” and any amendment to our corporate governance documents will be posted within the time period required by the rules of the SEC and the NYSE. In addition, corporate presentations are also made available on our website from time to time under “Shareholders—Events & Presentations."

Colony Capital Investor Relations can be contacted by mail at: Colony Capital, Inc, 590 Madison Avenue, 34th Floor, New York, NY 10022, Attn: Investor Relations; or by telephone: (561) 570-4644, or by email: ir@clny.com.

Item 1A. Risk Factors.

The following risk factors and other information included in this Annual Report should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us that we currently deem immaterial or that generally apply to all businesses also may adversely impact our business. If any of the following risks occur, our business, financial condition, operating results, cash flow and liquidity could be materially adversely affected.

Risks Related to Our Business Strategy

Our success depends on our ability to effectuate our digital transformation, including by monetizing legacy assets and simplifying our business operations.

In 2019, in connection with the acquisition of DBH, we announced our vision to establish the Company as a leading owner, operator and investment manager of digital infrastructure and real estate. In order to successfully execute on our digital transformation and achieve the anticipated benefits, we need to monetize our legacy assets to fund the growth in our digital business as well as to simplify our business operations. As of December 31, 2020, we had $11.9 billion in legacy assets, including $4.1 billion held for disposition, primarily related to the Company's pending exit of its hospitality business. If we are unable to consummate the pending hospitality exit transaction or otherwise monetize our legacy assets in the timeframe anticipated, our ability to grow our digital business and execute our digital transaction could be materially and adversely affected, which could in turn negatively impact the Company’s stock price. There can be no assurance, however, regarding when or the extent to which we will be able to execute our digital transformation and realize any of the anticipated or other benefits we expect from the transformation, which may be difficult, unpredictable and subject to delays.

Our investment strategy includes owning and/or managing a wide array of asset classes within the digital infrastructure and real estate industry; however, we may not successfully implement this investment strategy or ultimately realize any of the anticipated benefits of diversification.

We plan to invest in multiple asset classes within digital infrastructure and real estate, including but not limited to, data centers, cell towers, fiber networks and small cells, throughout the United States and the world. Although there can be no assurance that we will achieve this objective, we intend to build our digital infrastructure and real estate portfolio based on key attributes including, but not limited to, (i) market dynamics, (ii) asset quality, with a focus on hard-to-replicate assets, (iii) contract quality, with consideration given to contract duration, tenant quality, and tenant growth opportunities, (iv) management or platform potential, including through organic growth or acquisitions and (v) levels of leverage, based on the risk, duration and structure of cash flows of the underlying asset. However, we may not successfully implement our investment strategy. Even if we do fully achieve our investment goals, it is possible our multi-asset portfolio will not perform as well as a portfolio that is concentrated in a particular type of digital assets.

There are no limitations on the number or value of particular types of investments that we may make. We currently have multiple business segments in a variety of asset classes and industries; however, we expect our portfolio over time to consist predominantly of digital infrastructure and real estate assets and investment management businesses consistent with our digital transformation. Even though our investment strategy involves investing in multiple asset classes within digital infrastructure and real estate, we are not required to meet any diversification standards, including

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geographic diversification standards. Therefore, our investments may become concentrated in type or geographic location. As of the date of this report, substantially all of the digital investments on the Company’s balance sheet are data centers, primarily located in the United States. Our lack of diversification standards, along with our digital-focused investment strategy, could subject us to significant concentration risks with potentially adverse effects on our investment objectives.

Our business vision is to be a leading owner, operator and investment manager of digital infrastructure and real estate, which may adversely impact our stock price and our intent to maintain our REIT qualification.

Our business vision is to be a leading owner, operator and investment manager of digital infrastructure and real estate, which includes owning real estate assets on our balance sheet as well as operating an investment management platform. While we believe there are advantages to having both direct real estate investments and an investment management platform, these advantages may not be recognized by the investment community and, as a result, our stock price may be adversely affected. There are a very limited number of REITs pursuing an investment management growth strategy similar to our company, which may make it difficult for investors to value our overall business. If our company is perceived by investors as overly complex and difficult to analyze, our ability to raise capital and our stock price may be adversely impacted.

In addition, the pace of growth of our investment management business, coupled with the pace of our legacy asset monetizations, may ultimately conflict with our intent to maintain our REIT qualification for 2021. If we are unable to acquire sufficient qualifying REIT assets in 2021 to offset our anticipated legacy asset monetizations in 2021 and the growth in our investment management business, we may determine that it is not in our best interest to continue qualifying as a REIT, beginning in 2021. If we cease to qualify as a REIT, we would become subject to U.S. federal income tax on our net taxable income and generally would no longer be required to distribute any of the Company’s net taxable income to our stockholders. While the maximum U.S. federal income tax rate applicable to corporations currently is 21%, the Biden administration is expected to propose material increases in the U.S. corporate tax rate. As a REIT, we are permitted to deduct any dividends paid on our stock from our REIT taxable income. While we currently do not pay a dividend on our common stock, we pay dividends on our approximately $1 billion of outstanding preferred stock. If we cease to qualify as a REIT, we would not be able to deduct any dividends (including the preferred dividends we currently pay) from our taxable income, which may result in higher income tax expense. A decision to de-REIT may not result in any of the anticipated benefits to our company and could negatively and adversely affect our business, financial condition, results of operations, returns to stockholders and the market price of our common stock.

Moreover, our investment management business may involve risks not otherwise present with a direct investment in an investment vehicle’s target assets, including, among others, investors failing to meet their capital commitment obligations, restrictions on our ability to transfer our interests in an investment vehicle, litigation risk between us and our investors, and exposure to potential liability in connection with our obligations as an investment vehicle’s general partner/manager.

Pandemics or disease outbreaks, such as the current novel coronavirus (COVID-19) pandemic, have and the COVID-19 pandemic is expected to continue to, significantly disrupt, and may materially adversely impact, our business, financial condition and ability to execute on our business objectives.

The COVID-19 pandemic has had and may continue to have, and another pandemic in the future could have, repercussions across regional and global economies and financial markets. The outbreak of COVID-19, which first surfaced in Wuhan, China in December 2019 and was declared a pandemic by the World Health Organization in March 2020, has significantly adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets. The impact of the pandemic has been rapidly evolving and, as the number of COVID-19 cases increased, many countries, including the United States, reacted by instituting quarantines, restricting and banning travel or transportation, mandating business and school closures, limiting size of gatherings and canceling sporting, business and other events and conferences. While in May 2020, some parts of the United States had begun to ease the lockdown restrictions and allow businesses to reopen, a resurgence of COVID-19 cases towards the end of 2020 and into 2021 caused many U.S. states to re-institute such restrictions and business closure mandates. It is unknown when easing of these lockdowns and reopening will occur even as COVID-19 vaccines become available across the United States.

While we continue our digital transformation, a significant portion of our assets consist of, and our revenues are derived from, real estate investments, including wellness infrastructure and hospitality assets. The COVID-19 pandemic has impacted states and cities where we and our tenants operate our and their respective wellness infrastructure, hospitality and other businesses and where our properties are located. The preventative measures taken to alleviate the public health crisis, including significant restrictions on travel between the United States and specific countries, and “shelter-in-place” or “stay-at-home” orders issued by local, state and federal authorities, has significantly disrupted global

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travel and supply chains, and has adversely impacted global commercial activity across many industries, including in particular the travel, group meeting and conference, lodging and hospitality industries, and has disrupted, and is anticipated to further disrupt, operations and businesses in the wellness infrastructure industries, as discussed further below.

The occupancy rates of and revenues generated by our hospitality properties depends on the ability and willingness of guests to travel to our hotels. The spread of COVID-19 has not only decreased guests’ willingness to travel, but also prevented guests from traveling to visit or stay at our hotels as a result of federal travel, social distancing or mandated “shelter-in-place” or “stay-at-home” orders and even as such orders have begun to be lifted in the United States, demand for travel has and is expected to continue to be adversely impacted. Similarly, some tenants in our medical office buildings within our wellness infrastructure portfolio have and may continue to seek flexible payment terms or concessions from us for paying lease charges as a result of such restrictions. In addition, COVID-19 has impacted occupancy at our wellness infrastructure properties, as inquiries, tours and move-ins have all declined.

In addition, COVID-19 has had an adverse impact on the business and financial condition of publicly-traded mortgage REITs, including CLNC, the Company’s managed mortgage REIT, in which it owns an approximate 36% interest. The borrowers of CLNC’s real estate debt investments, including in the office, industrial, multifamily and hotel industries, have and will continue to be affected to the extent that COVID-19’s persistence reduces occupancy, increases the cost of operation, limits hours or necessitates the closure of the properties collateralizing such debt investments. In addition, governmental measures, such as quarantines, states of emergencies, restrictions on travel, stay-at-home orders, and other measures taken to curb the spread of the COVID-19 may negatively impact the ability of CLNC’s borrowers or tenants to continue to obtain necessary goods and services or provide adequate staffing, which may also adversely affect CLNC's loan investments and operating results. Many mortgage REITs suspended dividends to stockholders beginning in the second quarter 2020. In April 2020, CLNC announced that to conserve available liquidity, it would suspend its monthly stock dividend beginning with the monthly period ending April 30, 2020. On February 24, 2021, CLNC announced that it will pay a quarterly dividend for the quarter ending March 31, 2021, and expects to continue quarterly cash dividends thereafter. However, any dividends declared by CLNC are subject to the approval of CLNC's majority independent board and dependent upon a variety of factors. There can be no assurance that CLNC will continue paying its dividend as anticipated or at all. In addition, the Company’s Core FFO is directly impacted by CLNC’s performance as a result of the Company's ownership interest in CLNC and, to the extent CLNC continues to experience operational challenges as a result of COVID-19, our Core FFO will similarly be adversely impacted.

Further, CLNC's stock price fell significantly in March and April 2020 due to the significant volatility in equity markets resulting from COVID-19. Along with other publicly traded mortgage REITs, CLNC has experienced a rebound in its stock price during the third quarter 2020 and into 2021, but its stock continues to experience volatility and trade below pre-COVID-19 levels. With increasing uncertainty over the extent and duration of the COVID-19 pandemic, and the timeline for a recovery in the U.S economy, the Company recognized an $275 million other-than-temporary impairment on its CLNC investment in the second quarter 2020. The foregoing impairment was in addition to the $228 million other-than-temporary impairment on its CLNC investment recognized in the second quarter 2019. At December 31, 2020, the carrying value of our CLNC investment was $385 million, or $8.04 per share, while the trading price of CLNC’s stock was $7.50 per share. As of February 22, 2021, the trading price of CLNC’s stock was $8.71 per share. If the trading price of CLNC's class A common stock were to suffer further declines, to levels below our current carrying value for a prolonged period of time, as a result of COVID-19 or otherwise, an additional other-than-temporary impairment may be recognized in the future.

The difficult market and economic conditions created by COVID-19 have adversely impacted, and are expected to continue to adversely impact, our ability to effectuate our business objectives and strategies. A key component of our business strategy is to monetize certain non-digital, non-core assets in our other equity & debt segment. Many experts predict that the outbreak will trigger, or may have already triggered, a prolonged period of global economic slowdown or a global recession. A sustained downturn in the U.S. economy could negatively impact our ability to consummate asset monetizations within the timeframe and at the values previously anticipated. In addition, the ability to raise capital for our current or anticipated digital-focused investment vehicles may be delayed or adversely impacted by the market and economic conditions which could prevent us from executing our digital pivot and growing our digital business.

The inability to consummate asset monetizations has affected, and could continue to adversely affect, our liquidity and ability to meet our debt obligations or pay dividends to stockholders. For example, in May 2020, we announced the suspension of our common stock dividend for the second quarter of 2020 as the Company's board of directors and management believe it is prudent to conserve cash during the current period of uncertainty. In addition, in connection with the June 2020 amendment to the Company’s corporate credit facility, we are prohibited from, among other things, paying dividends, other than (i) paying dividends to maintain the Company’s REIT status, (ii) reducing the payment of income taxes and (iii) paying dividends on the Company’s preferred stock. As a result, for the term of the corporate credit facility,

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the Company is prohibited from paying dividends on its common stock, subject to certain limited exceptions. Nonetheless, all permissible distributions are made at the discretion of the Company's board of directors in accordance with Maryland law and depend on our financial condition; debt and equity capital available to us; our expectations for future capital requirements and operating performance; restrictive covenants in our financial or other contractual arrangements, including those in our corporate credit facility; maintenance of our REIT qualification; restrictions under Maryland law; and other factors as our board of directors may deem relevant from time to time.

As a result of these and other factors, we expect our cash flows generated by our real estate investments, particularly in the hospitality and wellness infrastructure industries, to continue to be negatively impacted. Because a substantial portion of our income is derived from these businesses as well as our proceeds from asset monetizations, our business, income, cash flow, results of operations, financial condition, liquidity, prospects and ability to service our debt obligations and our ability to pay dividends and other distributions to our stockholders has been and will continue to be adversely affected if revenues at our hotel and wellness infrastructure properties continue to decline or we are unable to complete certain asset monetizations.

In addition, as COVID-19 has demonstrated the global economy's dependence on digital infrastructure and real estate, the Company has determined to accelerate its shift to a digitally-focused strategy. In doing so, the Company may accelerate the disposition of its legacy assets and portfolios and continue to focus on the growth of the Company's investment management business focused on digital infrastructure and real estate. This transition may be inconsistent with the Company's status as a REIT. For example, in September 2020, the Company entered into a definitive agreement to sell five of the six hotel portfolios in its Hospitality segment and its 55.6% interest in the THL Hotel Portfolio in the Other segment. While the Company will remain a REIT through 2020, in light of its strategy to accelerate the digital transformation, the Company will continue to evaluate whether to maintain REIT status beyond 2020. If the Company ceases to qualify as a REIT, we could be subject to the risks described under “Risk Factors Related to our Business Strategy - Our business vision is to be a leading owner, operator and investment manager of digital infrastructure and real estate, which may adversely impact our stock price and our intent to maintain our REIT qualification” above.

Furthermore, our corporate credit facility requires us to maintain various financial covenants, including minimum tangible net worth, liquidity levels and financial ratios. Our corporate credit facility also requires us to maintain the Company’s REIT status. The June 2020 amendment to our corporate credit facility, among other things, modified certain financial covenants and reduced the aggregate amount of revolving commitments available under the corporate credit facility. Notwithstanding such amendment, based on the decline in performance in our hotel and wellness infrastructure portfolios we are currently experiencing as a result of the COVID-19 pandemic and given the limited visibility to the future recovery of demand in the hospitality industry, there is a range of possible outcomes which may result in a breach of certain financial covenants prior to the current extended maturity of July 2021. In addition, because we exercised our initial extension option on the corporate credit facility, the aggregate amount of revolving commitments available under the corporate credit facility will be reduced to $400 million on March 31, 2021. To the extent that we are unable to effectuate asset monetizations in our Other segment as discussed above, we may be forced to allocate capital to repaying any outstanding balance on the corporate credit facility (either at the initial maturity, in connection with an extension on March 31, 2021, or the final maturity) that otherwise may have been used to invest in and grow the Company's digital infrastructure and real estate business. The occurrence of any of the foregoing could materially and adversely impact our liquidity and business operations.

Additionally, we have significant non-recourse mortgage debt in the Hospitality, Wellness Infrastructure and Other segments, as discussed further below. During 2020, in connection with payment defaults and/or covenant breaches, we executed various forbearance and other debt modification agreements with respect to the majority of such non-recourse mortgage debt. However, our efforts to obtain forbearances or debt modifications were not all successful. For example, as of the date of this report and as further described below, we have consensually transferred certain wellness infrastructure assets to lenders in exchange for a release of $158 million in borrowings secured by such assets, and the Inland Hotel Portfolio is in receivership. In addition, since October 2020, we have made approximately $28 million in aggregate payments to cure defaults and/or maintain debt compliance on a certain hospitality portfolio where we were not able to successfully complete a modification of the associated debt. We expect that a portion of these payments will be returned to us, either in connection with the pending hospitality disposition transaction or as a result of the provisions of the associated loan agreement; however, there can be no assurances that any of these funds will be returned as anticipated. Further, there can be no assurances that any forbearances or debt modifications obtained will result in any of the anticipated benefits. As of the date of this report, $3.5 billion of non-recourse mortgage debt on our hospitality properties is subject to cash flow sweeps. In addition, as of the date of this report, approximately $213 million in non-recourse mortgage debt in our Other and Wellness Infrastructure segments is in default and we expect to convey the mortgaged assets to the lenders via foreclosure or otherwise. Moreover, we have entered into customary non-recourse carve-out guarantees, which provide for these otherwise non-recourse borrowings to become partially or fully recourse

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against certain of the Company's affiliates in connection with certain limited trigger or "bad boy" events. Although we believe that “bad boy” carve-out guaranties are not guaranties of payment in the event of foreclosure or other actions of the foreclosing lender that are beyond the borrower’s control, some lenders in the real estate industry have recently sought to make claims for payment under such guaranties. In the event such a claim were made against us under a “bad boy” carve-out guaranty, following foreclosure on mortgages or related loans, and such claim were successful, our business and financial results could be materially adversely affected.

In addition, the COVID-19 pandemic, or a future pandemic, could have material and adverse effects on our business, income, cash flow, results of operations, financial condition, liquidity, prospects and ability to service our debt obligations and has, and may continue to have, a material and adverse effect on our ability to pay dividends and other distributions to our stockholders due to, among other factors:

•difficulty accessing debt and equity capital on attractive terms, or at all, and a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our access to capital necessary to fund business operations or address maturing liabilities on a timely basis and our tenants/borrowers’ abilities to fund their business operations and meet their obligations to us;

•difficulty raising capital and attracting investors at our current and any future managed investment vehicles due to the volatility and instability in global financial markets may constrain the success of our managed investment vehicles and consequently our ability to sustain and grow our investment management business;

•the financial impact has and could continue to negatively impact our ability to pay dividends to our stockholders or could result in a determination to reduce the size of one or more dividends, such as is the case with (i) our decision to suspend the dividend on our common stock beginning the second quarter of 2020 and (ii) certain restrictions on our ability to pay dividends on our common stock pursuant to the recent amendment to our corporate credit facility;

•the financial impact could negatively impact our future compliance with financial covenants of our corporate credit facility and other debt agreements and could result in a default and potentially an acceleration of indebtedness, which non-compliance could also negatively impact our ability to make additional borrowings under our revolving credit facility or otherwise pay dividends to our stockholders;

•the worsening of estimated future cash flows due to a change in our plans, policies, or views of market and economic conditions as it relates to one or more of our adversely impacted properties could result in fair value decreases and the recognition of substantial impairment charges imposed on our assets;

•the credit quality of our tenants/borrowers could be negatively impacted and we may significantly increase our allowance for doubtful accounts;

•a general decline in business activity and demand for real estate transactions could adversely affect our ability or desire to grow our digital business or dispose of non-core assets as part of our asset monetization and digital pivot strategy;

•potential impairments on our real estate assets or ceasing to own real estate assets as a result of foreclosure or otherwise may impact our ability to maintain our REIT qualification or our exemption from the 1940 Act;

•CLNC's trading price and the impact on the carrying value of the Company's investment in CLNC, including whether the Company will recognize further other-than-temporary impairments on such CLNC investment in addition to those recognized in the second quarter 2020;

•we have and may continue to implement reductions in our workforce, which could adversely impact our ability to conduct our operations effectively;

•unanticipated costs and operating expenses and decreased anticipated revenue related to compliance with regulations, such as inability to litigate non-paying tenants, regulations requiring forbearance of rent payments in certain jurisdictions, additional expenses related to staff working remotely, requirements to provide employees with additional mandatory paid time off and increased expenses related to sanitation measures performed at each of our properties, as well as additional expenses incurred to protect the welfare of our employees, such as expanded access to health services;

•our level of dependence on the Internet, stemming from employees working remotely, and increases in malware campaigns and phishing attacks preying on the uncertainties surrounding COVID-19, which may increase our vulnerability to cyber attacks and cause disruptions to our internal control procedures;

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•increased risk of litigation, particularly with respect to our wellness infrastructure properties, related to the COVID-19 pandemic;

•we, and in particular the success of our pivot to a digital infrastructure and real estate focused strategy, depend, to a significant extent, upon the efforts of our senior management team, including DBH’s key personnel. If one or more members of our senior management team or the DBH team become sick with COVID-19, the loss of services of such member could adversely affect our business;

•the potential negative impact on the health of our personnel, particularly if a significant number of them are impacted, could result in a deterioration in our ability to ensure business continuity during a disruption; and

•the continued severity, duration, transmission rate and geographic spread of COVID-19 in the United States and elsewhere, the speed of the vaccine roll-out, effectiveness and willingness of people to take COVID-19 vaccines, the duration of associated immunity and their efficacy against emerging variants of COVID-19, the extent and effectiveness of other containment measures taken.

Moreover, the impact of COVID-19 pandemic may also exacerbate many of the risks described in this Annual Report.

Risks Related to Our Hospitality Business. The effects of the COVID-19 pandemic on the hospitality industry are unprecedented with global demand for lodging drastically reduced and occupancy levels reaching historic lows during the second quarter 2020. Many hotels have had to temporarily suspend operations or operate at reduced levels. As of the date of this report, all of our hotel properties remain open but are operating at reduced levels; however, we may determine or be required to temporarily suspend the operations at hotels in the future as a result of the COVID-19 pandemic.

In addition, in order to reduce operating costs and improve efficiency, hotel operators, including our hotel operators, have furloughed a substantial number of personnel and may, in the future, furlough more personnel. Such steps and other hotel personnel work schedule changes that may be made in the future to reduce costs for us or our hotel operators or franchisors, may have other consequences such as negatively impacting the reputation and demand for our hotels or operational challenges if our operators are unable to re-hire furloughed personnel, any of which could have an adverse impact on our ability to improve performance and operations at our hotels when the COVID-19 pandemic subsides. In addition, if we are unable to access capital to make physical improvements to our hotels, the quality of our hotels may suffer, which may negatively impact demand for our hotels. Our third-party hotel managers may also face demands or requests from labor unions for additional compensation or other terms as a result of COVID-19 that could increase costs, and while we do not directly employ or manage employees at our hotels, we could incur costs in connection with such labor disputes or disruptions as our COVID-19 mitigation plans are implemented. We cannot predict when business levels will return to normalized levels when the effects of the pandemic subside. There also can be no guarantee that the demand for lodging, and consumer confidence in travel generally, will recover as quickly as other industries. As a result, the revenues from our hospitality portfolio have declined significantly and we expect this trend to continue.

Furthermore, we have significant non-recourse borrowings outstanding on our hospitality properties (including the THL Hotel Portfolio). As of the date of this report, while none of such borrowings is currently in default, during 2020, nearly all of the $3.5 billion in aggregate principal amount of such borrowings was in default as a result of the failure to make interest payments in light of the impact COVID-19 has had on our hospitality properties. In addition, we have, and may in the future, receive notices of acceleration with respect to our defaulted borrowings. Further, we were not successful in our negotiations with the lender of the mortgage debt collateralized by a portfolio of 48 extended stay and select service hotel properties known as the Inland Hotel Portfolio and, during the third quarter 2020, a receiver was appointed at substantially all of the assets in the Inland Hotel Portfolio. During the period while the receiver is in place, we will no longer be in control of the operations of the Inland Hotel Portfolio even while still owning the assets.

We were able to restructure the majority of our non-recourse borrowings that were in default in 2020 in our hospitality portfolio in connection with COVID-19, either by executing forbearance agreements permitting us not to make interest payments for a specified period of time or entering into other loan modification agreements. However, for the borrowings that have been restructured or modified, or which are no longer in default, there can be no assurance that the cash flow generated from our hospitality portfolios will be sufficient to service such borrowings. As a result, we may need to pursue further restructurings of these borrowings or seek forbearance or other accommodations from our lenders. In connection with the same, we may be required to repay outstanding obligations, including penalties, prior to the stated maturity, be subject to cash flow sweeps or potentially have assets foreclosed upon, any of which may impact our ability to consummate the pending disposition of our hospitality business. As of the date of this report, an aggregate of $3.5 billion in our hospitality borrowings are subject to cash flow sweeps. During the fourth quarter 2020, there was a resurgence in COVID-19 cases in the United States, and although the number of new cases has begun to decline slightly since reaching peak levels in early January 2021, the number of new cases is remains at very high levels and such trend is anticipated to continue or worsen during the winter season. This resurgence has resulted, and could continue to result, in the re-

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implementation or tightening of travel and stay-at-home restrictions. In addition, as previously disclosed, due to effects of seasonality, our hospitality properties typically generate lower revenues, operating income and cash flows in the first and fourth quarters of each year. During the fourth quarter 2020, due to the COVID-19 resurgence and seasonality, our hospitality properties experienced a decline in operating performance, and there can be no assurance that such performance will improve.

We have recognized significant impairments on hospitality properties (including the THL Hotel Portfolio). During the second and third quarters 2020, primarily related to assets which are anticipated to be divested or sold in the near term and have fair market values below their respective carrying values, we incurred an aggregate of $844 million in impairments on hospitality properties (including the THL Hotel Portfolio). To date, the Company has made payments totaling $28 million to lenders in order to cure certain defaults on the debt associated with a hotel portfolio. In connection with the pending disposition of our hospitality business, the seller has agreed, subject to the satisfaction of certain conditions, to provide the Company with a purchase price credit for a portion of such funded amount; however, there can be no assurance that the Company will close the pending transaction or receive the anticipated purchase price credit. Moreover, depending on the status of ongoing negotiations with lenders, our anticipated hold periods for such assets and cash flow projections, among other factors, we may make additional payments to lenders or take additional impairments on hospitality properties.

In addition, we have agreed to guarantee or contribute to guaranteed payments of franchise fees and marketing fees to our hotel franchisors. In certain instances, such guarantee or contribution agreements may also include an obligation to pay liquidated damages to the hotel franchisor on an early termination of the applicable franchise agreement. In the event that a lender forecloses on our hospitality properties (including in the case of the Inland Hotel Portfolio which is currently in receivership), we may not be released from these payment guarantees or liquidated damages obligations and we may not have any control over whether a franchise agreement is terminated. In the case of the Inland Hotel Portfolio, we have received termination notices with respect to franchise agreements for hotels within the portfolio where the receiver has entered into a new franchise agreement with the applicable franchisor directly. We have not received any claims for liquidated damages from any such applicable franchisor of the terminated franchise agreement; however, there can be no assurances that liquidated damages will not be sought in the future.

Risks Related to Our Wellness Infrastructure Business. We anticipate that the impact of the COVID-19 pandemic will vary by asset class within our wellness infrastructure portfolio. Many of the tenants in our medical office buildings suspended non-essential activities, and accordingly sought rent relief. In our senior housing and skilled nursing facilities, occupancy, which is the primary driver of revenues, has declined and may continue to decline during the pandemic as limitations on admissions and fewer inquiries and tours have caused a significant reduction in move-ins, while COVID-19 at the same time increases the risk of resident illness and move-outs. In addition, operating costs at our senior housing and skilled nursing facilities have increased to secure adequate staffing and personal protective equipment. We do not know to what extent, if any, federal relief programs may alleviate these concerns. We will be directly impacted by these factors in our RIDEA assets, or indirectly impacted in our net leased assets as these factors influence our tenants’ ability and willingness to pay rent. We may be forced to restructure tenants’ long-term lease obligations or suffer adverse consequences from the bankruptcy, insolvency or financial deterioration of one or more of our tenants, operators, borrowers or managers. As a result, we expect a significant decline in revenues, net operating income and cash flow generated by operations from our wellness infrastructure portfolio.

We have significant non-recourse borrowings outstanding on our wellness infrastructure properties. As of the date of this report, we have conveyed to an affiliate of our lender a portfolio of 36 assets in a consensual transfer to obtain a release on $158 million in aggregate principal amount in borrowings (as discussed above) and have another $45 million in aggregate principal amount of such borrowings in default. As the impact of COVID-19 continues to influence performance at our wellness infrastructure properties, we may experience additional defaults and may be subject to cash flow sweeps. Any such defaults will negatively impact our liquidity and may increase our risk of loss associated with our wellness infrastructure properties. We have entered into forbearance agreements suspending debt service payments for a limited period of time for certain portfolios, subject to satisfaction of certain conditions, and are in active discussions with other lenders, where necessary, regarding deferral of payment obligations and forbearance/waiver of non-payments defaults for failure to satisfy certain financial or other covenants. However, if COVID-19 continues to impact performance and we are unable to obtain accommodations from our lenders, we may be required to repay outstanding obligations, including penalties, prior to the stated maturity, or potentially have assets foreclosed upon.

From time to time, we are involved in legal proceedings, lawsuits and other claims. We may also be named as defendants in lawsuits arising out of our alleged actions or the alleged actions of our tenants and operators for which such tenants and operators have agreed to indemnify, defend and hold us harmless. We may be subject to increased risk of litigation and liability claims as a result of the COVID-19 pandemic and our operating partners’ response efforts. Some of these claims may result in large damage awards, which may not be sufficiently covered by insurance or indemnity

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obligations. Any such litigation may have a material adverse effect on our business, results of operations and financial condition.

Given the ongoing nature of the outbreak, at this time we cannot reasonably estimate the magnitude of the ultimate impact that COVID-19 will have on our business, financial performance and operating results. We believe COVID-19’s adverse impact on our business, financial performance and operating results will be significantly driven by a number of factors that we are unable to predict or control, including, for example: the severity and duration of the pandemic; the pandemic’s impact on the U.S. and global economies; the timing, scope and effectiveness of additional governmental responses to the pandemic; the timing and speed of economic recovery, including the availability of a treatment or vaccination for COVID-19; and the negative impact on our fund investors, vendors and other business partners that may indirectly adversely affect us.

Risks Related to Our Digital Business

We require capital in order to continue to operate and grow our business, and the failure to obtain such capital, either through the public or private markets or other third party sources of capital, would have a material adverse effect on our business, financial condition, results of operations and ability to maintain our distributions to our stockholders.

We require capital to fund acquisitions and originations of our target investments, to fund our operations, including overhead costs, to fund distributions to our stockholders and to repay principal and interest on our borrowings. We expect to meet our capital requirements using cash on hand, cash flow generated from our operations and investment management activities, sale proceeds from non-core investments and principal and interest payments received from legacy debt investments. However, because of distribution requirements imposed on us to qualify as a REIT which generally requires that we distribute to our stockholders 90% of our taxable income and that we pay tax on any undistributed income, our ability to finance our growth must largely be funded by external sources of capital. As a result, we may have to rely on third party sources of capital, including public and private offerings of securities and debt financings.

In addition, the fee income generated from or expected to be generated from our current and future managed investment vehicles is driven, both directly and indirectly, by the ability to raise capital at such investment vehicles. Our ability to raise capital at our company, as well as at our current and future managed investment vehicles, through the public and private capital markets depends on a number of factors, including many that are outside our control, such as the general economic environment, the regulatory environment, competition in the marketplace, media attention and investor investment allocation preferences. Poor performance by, or negative publicity about, our Company, our strategy, our management or our managed companies could also make it more difficult for us or our managed investment vehicles to raise new capital. Investors in our managed companies may decline to invest in future companies we raise, and investors may withdraw their investments in our managed companies (subject to the terms of such managed company) as a result of poor performance or negative perceptions of our Company or our leadership. In addition, third party financing may not be available to us when needed, on favorable terms, or at all. If we are unable to obtain adequate financing to fund or grow our business, it would have a material adverse effect on our ability to acquire additional assets and make our debt service payments and our financial condition, results of operations and the ability to fund our distributions to our stockholders would be materially adversely affected.

Adverse changes in general economic and political conditions could adversely impact our business, financial condition and results of operations.

Our business is materially affected by general economic and political conditions in the United States and globally, and our ability to manage our exposure to these conditions may be very limited. These conditions and/or events can adversely affect our business in many ways, including by reducing the ability of our managed vehicles to raise or deploy capital, reducing the value or performance of our investments and the investments made by our managed vehicles and making it more difficult for us and our managed vehicles to realize value from existing investments. Adverse changes in market and economic conditions in the United States or the countries or regions in which we or our managed vehicles invest would likely have a negative impact on real estate values as well as spending and demand for digital and communications infrastructure and technology and, accordingly, our and our managed vehicle’s financial performance, the market prices of our securities, and our ability to pay dividends.

The condition of the digital infrastructure and real estate markets in which we operate is cyclical and depends on the condition of the economy in the United States, Europe, China and elsewhere as a whole and to the perceptions of investors of the overall economic outlook. Rising interest rates, declining employment levels, declining demand for real estate, declining real estate values or periods of general economic slowdown or recession, increasing political instability or uncertainty, or the perception that any of these events may occur have negatively impacted the real estate market in the

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past and may in the future negatively impact our operating performance. In addition, the economic condition of each local market where we operate may depend on one or more key industries within that market, which, in turn, makes our business sensitive to the performance of those industries. Further, as we continue to build our investment portfolio in the digital infrastructure and real estate industries, we will become more dependent on demand for data center space, power and connectivity, which may be adversely affected in deteriorating global economic conditions.

In addition, political uncertainty may contribute to potential risks beyond our control, such as changes in governmental policy on a variety of matters including trade, healthcare, manufacturing, development and investment, the restructuring of trade agreements, and uncertainties associated with political gridlock. Any such changes in U.S. or international political conditions, or political uncertainty and instability, in the territories and countries where we or our tenants and customers operate could adversely affect our operating results, our business and the market price of our stock.

We have only a limited ability to change our portfolio promptly in response to changing economic or other conditions. Certain significant expenditures, such as debt service costs, real estate taxes, and operating and maintenance costs, are generally not reduced when market conditions are poor. These factors impede us from responding quickly to changes in the performance of our investments and could adversely impact our business, financial condition and results of operations.

The digital infrastructure and real estate industry is highly competitive and such competition may materially and adversely affect our performance and ability to execute our strategy.

The digital infrastructure and real estate business is highly competitive based on a number of factors, including brand recognition, reputation and pricing pressure on the products and services offered by the companies in which we expect to invest. A reduction in the perceived quality of services and products offered, or if our competitors offer rental, leasing or similar rates at below market rates or below the rates charged by the companies in which we invest, the performance of the companies in which we invest could be adversely impacted and, as a result, our ability to raise third party capital in our current and future digital focused private equity funds could be adversely impacted. In the event that we are unable to grow our digital real estate infrastructure platform as a result of our poor performance or lack of available funding for our investments, our business, results of operations, financial condition and prospects would be materially adversely affected.

We are also subject to significant competition for attractive investment opportunities from other digital investors, some of which have greater financial resources than us, including publicly-traded REITs, non-traded REITs, insurance companies, commercial and investment banking firms, private institutional funds, hedge funds, private equity funds and other investors. Some of our competitors and potential competitors have significant advantages over us, particularly as we continue our digital transformation, including greater name recognition, longer or more favorable operating histories, pre-existing relationships with current or potential customers, significantly greater financial, marketing and other resources and more ready access to capital which allow them to respond more quickly to new or changing opportunities. We may not be able to compete successfully for investments. In addition, the number of entities and the amount of funds competing for suitable investments may increase. To the extent we pay higher prices for our target investments or acquire assets on less advantageous terms to us, or are required to do so in the future, due to increased competition, our returns may be lower and the value of our assets may not increase or may decrease significantly below the amount we paid for such assets. If such events occur, we may experience lower returns on our investments.

Our operations in Europe and elsewhere expose our business to risks inherent in conducting business in foreign markets.

A portion of our revenues are sourced from our foreign operations in Europe and elsewhere or other foreign markets. Accordingly, our firm-wide results of operations depend in part on our foreign operations. Conducting business abroad carries significant risks, including:

•our REIT tax status not being respected under foreign laws, in which case any income or gains from foreign sources could be subject to foreign taxes and withholding taxes;

•changes in real estate and other tax rates, the tax treatment of transaction structures and other changes in operating expenses in a particular country where we have an investment;

•restrictions and limitations relating to the repatriation of profits;

•complexity and costs of staffing and managing international operations;

•the burden of complying with multiple and potentially conflicting laws;

•changes in relative interest rates;

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•translation and transaction risks related to fluctuations in foreign currency and exchange rates;

•lack of uniform accounting standards (including availability of information in accordance with accounting principles generally accepted in the United States ("GAAP"));

•unexpected changes in regulatory requirements;

•the impact of different business cycles and economic instability;

•political instability and civil unrest;

•legal and logistical barriers to enforcing our contractual rights, including in perfecting our security interests, collecting accounts receivable, foreclosing on secured assets and protecting our interests as a creditor in bankruptcies in certain geographic regions;

•share ownership restrictions on foreign operations;

•compliance with U.S. laws affecting operations outside of the United States, including sanctions laws, or anti-bribery laws such as the Foreign Corrupt Practices Act (“FCPA”); and

•geographic, time zone, language and cultural differences between personnel in different areas of the world.

Each of these risks might adversely affect our performance and impair our ability to make distributions to our stockholders required to qualify and remain qualified as a REIT. In addition, there is generally less publicly available information about foreign companies and a lack of uniform financial accounting standards and practices (including the availability of information in accordance with GAAP) which could impair our ability to analyze transactions and receive timely and accurate financial information from our investments necessary to meet our reporting obligations to financial institutions or governmental or regulatory agencies.

Concerns persist regarding the debt burden of certain Eurozone countries and their ability to meet future financial obligations, the overall stability of the euro and the suitability of the euro as a single currency, given the diverse economic and political circumstances in individual Eurozone countries and in recent volatility in the value of the euro. These concerns could lead to the re-introduction of individual currencies in one or more Eurozone countries, or, in more extreme circumstances, the possible dissolution of the euro currency entirely. Should the euro dissolve entirely, the legal and contractual consequences for holders of euro-denominated obligations would be uncertain. Such uncertainty would extend to among other things, whether obligations previously expressed to be owed and payable in euros would be re-denominated in a new currency, what laws would govern and the courts of which country would have jurisdiction. These potential developments, or market perceptions concerning these and related issues, could materially adversely affect the value of our euro-denominated assets and obligations.

In addition, the United Kingdom withdrew from the European Union (“EU”) effective as of January 31, 2020, but with a transition period until the end of 2020. A Trade and Cooperation Agreement (“TCA”) was agreed upon by the EU and the U.K. on December 24, 2020, and ratified by the European Council and the U.K. Parliament ahead of the end of the transition period on December 31, 2020. While the TCA has provisions for how both parties will trade, live, and work with one another, financial services are not covered in any detail in the TCA. The nature of much of the future economic and political relationship between the EU and the United Kingdom remains uncertain, and there is no guarantee that both parties will be able to adhere to the terms of the deal effectively. The United Kingdom’s exit from the EU has created political and economic uncertainty, particularly in the United Kingdom and the EU, and this uncertainty may last for years. Uncertainty about global or regional economic conditions poses a risk as consumers and businesses may postpone spending in response to tighter credit, negative financial news, and declines in income or asset values, which could adversely affect the availability of financing, the business of our tenants, our business and our results of operations.

Risks Related to our Digital Investment Management Business

The investment management business is intensely competitive.

The investment management business is intensely competitive, with competition based on a variety of factors, including investment performance, the quality of service provided to clients, brand recognition and business reputation. Our investment management business competes for clients, personnel and investment opportunities with a large number of private equity funds, specialized investment funds, hedge funds, corporate buyers, traditional investment managers, commercial banks, investment banks, other investment managers and other financial institutions, and we expect that competition will increase. Numerous factors serve to increase our competitive risks, some of which are outside of our control, including that:

•a number of our competitors have more personnel and greater financial, technical, marketing and other resources than we do;

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•many of our competitors have raised, or are expected to raise, significant amounts of capital, and many of them have investment objectives similar to ours, which may create additional competition for investment opportunities and reduce the size and duration of pricing inefficiencies that we seek to exploit;

•some of our competitors (including strategic competitors) may have a lower cost of capital and access to funding sources that are not available to us, which may create competitive disadvantages for us with respect to our managed companies, particularly our managed companies that directly use leverage or rely on debt financing of their portfolio companies to generate superior investment returns;

•some of our competitors have higher risk tolerances, different risk assessments or lower return thresholds, which could allow them to consider a wider variety of investments and to bid more aggressively than us for investments;

•our competitors may be able to achieve synergistic cost savings in respect of an investment that we cannot, which may provide them with a competitive advantage in bidding for an investment;

•there are relatively few barriers to entry impeding new funds, and the successful efforts of new entrants into our various lines of business, including major commercial and investment banks and other financial institutions, have resulted in increased competition;

•some investors may prefer to invest with an investment manager whose equity securities are not traded on a national securities exchange;

•some investors may prefer to pursue investments directly instead of investing through one of our managed companies;

•other industry participants will from time to time seek to recruit our investment professionals and other employees away from us; and

•other investment managers may offer more products and services than we do, have more diverse sources of revenue or be more adept at developing, marketing and managing new products and services than we are.

We may find it harder to raise capital in the REITs, private funds and other investment vehicles that we manage, and we may lose investment opportunities in the future, if we do not match the fees, structures and terms offered by competitors to their fund clients. Alternatively, we may experience decreased profitability, rates of return and increased risk of loss if we match the prices, structures and terms offered by competitors. This competitive pressure could adversely affect our ability to make successful investments and limit our ability to raise future managed investment vehicles, either of which would adversely impact our business, revenues, results of operations and cash flow.

Poor performance of our current and future managed investment vehicles could cause a decline in our revenue, income and cash flow.

The fee arrangements we have with certain of our managed investment vehicles are based on the respective performance of such companies. As a result, poor performance or a decrease in value of assets under management of such managed companies (or any companies we may manage in the future with similar performance-based fees) would result in a reduction of our investment management and other fees, carried interest and/or other incentive fees and consequently cause our revenue, income and cash flow to decline. Further, to the extent that we have an investment in a managed investment vehicle, poor performance at such investment vehicle could cause us to suffer losses on such investments of our own capital.

Investors in our current or future managed investment vehicles may negotiate terms less favorable to us than those of investment vehicles we currently manage, which could have a material adverse effect on our business, results of operations and financial condition.

In connection with sponsoring new managed investment vehicles or securing additional capital commitments in existing investment vehicles, we will negotiate terms for such investment vehicles and commitments from investors. In addition, we have agreed and may in the future agree to re-negotiate terms in the agreements with our investment vehicles due to performance of such investment vehicles or other market conditions. The outcome of such negotiations have and could in the future result in our agreement to terms that are materially less favorable to us economically than the existing terms of our investment vehicles or vehicles advised by our competitors. In addition, we have recorded and may in the future need to record impairments in the goodwill associated with such agreement as a result of amended economic terms in such agreements. For example, in each of the third and fourth quarters of 2019, we recognized impairments to our investment management goodwill of $387 million and $401 million, respectively, as a result of the loss of, or reductions in, management fees. See Note 7 to our consolidated financial statements for additional information regarding such impairments. Further, we may also agree to terms that could restrict our ability to sponsor competing investment vehicles, require us to dispose of an investment within a certain period of time, restrict our ability to sell all or a portion of

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our position in a co-investment, increase our obligations as the manager or require us to take on additional potential liabilities. Agreement to terms that are materially less favorable to us could result in a decrease in our profitability, which could have a material adverse effect on our business, results of operations and financial condition.

Valuation methodologies for certain assets in our managed institutional private funds can involve subjective judgments, and the fair value of assets established pursuant to such methodologies may be incorrect, which could result in the misstatement of performance and accrued performance fees of an institutional private fund.

There are often no readily ascertainable market prices for a substantial majority of illiquid investments of our managed institutional private funds. We determine the fair value of the investments of each of our institutional private funds at least quarterly based on the fair value guidelines set forth by GAAP. The fair value measurement accounting guidance establishes a hierarchal disclosure framework that ranks the observability of market inputs used in measuring financial instruments at fair value. The observability of inputs is impacted by a number of factors, including the type of financial instrument, the characteristics specific to the financial instrument and the state of the marketplace, including the existence and transparency of transactions between market participants. Financial instruments with readily available quoted prices, or for which fair value can be measured from quoted prices in active markets, will generally have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.

Investments for which market prices are not observable include, but are not limited to, illiquid investments in operating companies, real estate, energy ventures and structured vehicles, and encompass all components of the capital structure, including equity, mezzanine, debt, preferred equity and derivative instruments such as options and warrants. Fair values of such investments are determined by reference to (1) the market approach (i.e., multiplying a key performance metric of the investee company or asset, such as earnings before interest, income tax, depreciation and amortization ("EBITDA"), by a relevant valuation multiple observed in the range of comparable public entities or transactions, adjusted by management as appropriate for differences between the investment and the referenced comparables), (2) the income approach (i.e., discounting projected future cash flows of the investee company or asset and/or capitalizing representative stabilized cash flows of the investee company or asset) and (3) other methodologies such as prices provided by reputable dealers or pricing services, option pricing models and replacement costs.

The determination of fair value using these methodologies takes into consideration a range of factors including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, the multiples of comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment. These valuation methodologies involve a significant degree of management judgment. For example, as to investments that we share with another sponsor, we may apply a different valuation methodology than the other sponsor does or derive a different value than the other sponsor has derived on the same investment, which could cause some investors to question our valuations.

Because there is significant uncertainty in the valuation of, or stability of the value of, illiquid investments, the fair values of such investments as reflected in an institutional private fund’s net asset value do not necessarily reflect the prices that would be obtained by us on behalf of the institutional private fund when such investments are realized. Realizations at values significantly lower than the values at which investments have been reflected in prior institutional private fund net asset values would result in reduced earnings or losses for the applicable fund, the loss of potential carried interest and incentive fees and, in the case of our hedge funds, management fees. Changes in values attributed to investments from quarter to quarter may result in volatility in the net asset values and results of operations that we report from period to period. Also, a situation where asset values turn out to be materially different than values reflected in prior institutional fund net asset values could cause investors to lose confidence in us, which could in turn result in difficulty in raising additional institutional private funds.

Further, the SEC has highlighted valuation practices as one of its areas of focus in investment advisor examinations and has instituted enforcement actions against advisors for misleading investors about valuation. If the SEC were to investigate and find errors in our methodologies or procedures, we and/or members of our management could be subject to penalties and fines, which could harm our reputation and our business, financial condition and results of operations could be materially and adversely affected.

The organization and management of our current and future investment vehicles may create conflicts of interest.

We currently manage, and may in the future manage, private funds, REITs and other investment vehicles that have investment and/or rate of return objectives similar to our own. Those entities may be in competition with us with respect to investment opportunities, potential purchasers, sellers and lessees of properties, and mortgage financing opportunities. We have agreed to implement certain procedures to help manage any perceived or actual conflicts among us and our managed investment vehicles, including the following:

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•allocating investment opportunities based on numerous factors, including investment objectives, available cash, diversification/concentration, leverage policy, the size of the investment, tax, anticipated pipeline of suitable investments and fund life;

•all co-investment transactions with managed investment vehicles are subject to the approval of the independent directors of such investment vehicles that are publicly registered companies or previously approved in applicable company documentation, as the case may be; and

•investment allocations are reviewed at least annually by the chief compliance officer of our applicable registered investment adviser and/or the board of directors of the applicable investment vehicle that is a publicly registered company, as the case may be.

In addition, subject to compliance with the rules promulgated under the Investment Advisers Act, we have and may continue to allow a managed investment vehicle to enter into principal transactions with us or cross-transactions with other managed investment vehicles or strategic vehicles. For certain cross-transactions, we may receive a fee from, or increased fees from, the managed investment vehicle and conflicts may exist. If our interests and those of our managed companies are not aligned, we may face conflicts of interests that result in action or inaction that is detrimental to us, our managed investment vehicles, our strategic partnerships or our joint ventures.

In addition, in general, the DBH Portfolio Companies, including DataBank and Vantage SDC, and our Digital Colony funds have priority over us with respect to digital investment opportunities in the target asset classes and the jurisdictions in which we expect to invest. However, as a result of our acquisition of a controlling ownership interest in DataBank and Vantage SDC, we may be in a position to control whether DataBank or Vantage SDC, as applicable, accepts an investment allocation, which could result in conflicts of interest. Further, certain officers and senior management who make allocation decisions may have financial interests in a particular fund or managed investment vehicle, which may increase such conflicts of interest.

Appropriately dealing with conflicts of interest is complex and difficult and our reputation could be damaged if we fail, or appear to fail, to deal appropriately with one or more potential or actual conflicts of interest. Regulatory scrutiny of, or litigation in connection with, conflicts of interest would have a material adverse effect on our reputation, which would materially adversely affect our business and our ability to raise capital in future managed companies.

Conflicts of interest may also arise in the allocation of fees and costs among our managed companies that we incur in connection with the management of their assets. This allocation sometimes requires us to exercise discretion and there is no guarantee that we will allocate these fees and costs appropriately.

We may not realize the anticipated benefits of the Wafra strategic partnership.

The strategic partnership with Wafra in our Digital IM Business is expected to result in certain benefits to us, including, among others, providing us with liquidity to pursue strategic digital investments and grow our digital assets under management as well as enhancing our ability to accelerate our digital transformation. There can be no assurance, however, regarding when or the extent to which we will be able to realize these and any other benefits we expect from the transaction, which may be difficult, unpredictable and subject to delays.

In addition, pursuant to the strategic partnership documentation, Wafra has certain redemption rights which, if exercised, would require the Company to repurchase Wafra's equity investment, carried interest participation rights and warrants. Wafra's redemption rights are triggered upon the occurrence of certain events including key person or cause events under the governing documentation of certain Digital Colony investment vehicles and, for a limited period, upon Marc Ganzi, the Company's CEO and President, and Ben Jenkins, the Chairman and Chief Investment Officer of the Company's digital segment, ceasing to fulfill certain time and attention commitments to the Digital IM Business. If such redemption rights are exercised, Wafra will also have a redemption right with respect to any sponsor commitments previously made to the Company's funds and vehicles. No assurance can be given that such redemption events, if triggered, would arise at a time when the Company will have the cash on hand or other available liquidity (including availability under the Company's corporate credit facility) to satisfy the redemptions, which could result in the Company being forced to allocate capital away from other potential opportunities or uses that we would otherwise consider to be the most effective use of such capital.

Additionally, under certain circumstances following such time as our Digital IM Business comprises 90% or more of the Company’s assets, we have agreed to use commercially reasonable efforts to cooperate with Wafra to facilitate the conversion of Wafra’s equity investment into the Company's class A common stock. There can be no assurances that such conversion would occur or on what terms and conditions such conversion would occur, including whether such conversion, if it did occur in the future, would have any adverse impact on the Company, the Company’s stock price, governance and other matters.

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If any or all of the risks described above, including the risk that the redemption obligations are triggered, were to materialize, the Company’s results of operations, financial position and/or liquidity could be materially and adversely affected.

Risks Related to our Digital Real Estate Business

Any failure of our physical infrastructure or services could lead to significant costs and disruptions that could harm our business reputation and could adversely affect our earnings and financial condition.

Our digital real estate business depends on providing customers with highly reliable services, including with respect to power supply, physical security and maintenance of environmental conditions. We may fail to provide such service as a result of numerous factors, including mechanical failure, power outage, human error, physical or electronic security breaches, war, terrorism, fire, earthquake, hurricane, flood, climate change and other natural disasters, sabotage and vandalism.

Problems at one or more of our data centers, towers or other digital infrastructure assets in which we expect to invest, whether or not within our control, could result in service interruptions or equipment damage. Substantially all of the customer leases associated with our digital assets include terms requiring us to meet certain service level commitments to such customers. Any failure to meet these or other commitments or any equipment damage in our data centers, including as a result of mechanical failure, power outage, human error or other reasons, could subject us to liability under our lease terms, including service level credits against customer rent payments, monetary damages, or, in certain cases of repeated failures, the right by the customer to terminate the lease. Service interruptions, equipment failures or security breaches may also expose us to additional legal liability, regulatory requirements, penalties and monetary damages and damage our brand and reputation, and could cause our customers to terminate or not renew their leases. In addition, we may be unable to attract new customers if we have a reputation for service disruptions, equipment failures or physical or electronic security breaches in our data centers or with regard to other digital infrastructure assets. Any such failures could materially adversely affect our business, financial condition and results of operations.

We do not control the operations of certain of our digital real estate assets and are therefore dependent on portfolio company management teams to successfully operate their businesses.

Our data centers are typically operated by in place management teams at the portfolio companies which hold these assets and in which we own our interests or by third party management companies. While we have or expect to have various rights as an owner of the portfolio companies, we may have limited recourse under our management agreements or investment interest documentation if we believe that such in place management teams (who are not our employees) or third party management companies are not performing adequately. Failure by the in place management teams to adequately manage the risks associated with managing data centers could result in defaults under our borrowings and otherwise affect adversely our results of operations. Furthermore, if the portfolio companies or management companies experience any significant financial, legal, accounting or regulatory difficulties, such difficulties could have a material adverse effect on us.

The performance of our digital assets depends upon the demand for such assets.

We have determined to shift our strategy to focus on becoming a leading platform for digital infrastructure and real estate, which owns, manages, and/or operates across all major components of the digital ecosystem including data centers, cell towers, fiber networks and small cells. A reduction in the demand for these digital assets, power or connectivity will adversely impact our ability to execute our business strategy and our performance. Demand for digital assets is particularly susceptible to general economic slowdowns as well as adverse developments in the data center, Internet and data communications and broader technology industries. Any such slowdown or adverse development could lead to reduced corporate IT spending or reduced demand for data center space or towers. Reduced demand could also result from business relocations, including to metropolitan areas that we do not currently or expect to serve. Changes in industry practice or in technology could also reduce demand for the physical data center space or the tower assets we provide or expect to provide. In addition, our customers may choose to develop new data centers or expand their own existing data centers or consolidate into data centers that we do not own or operate, which could reduce demand for our newly developed data centers or result in the loss of one or more key customers. With respect to the tower assets we expect to own, demand for towers could be adversely impacted by changes in federal, state, local and foreign jurisdictions to the extent such regulations prohibiting the additions of new towers on potential communication sites. If we lose a customer or a tenant, we cannot assure you that we would be able to replace that customer at a competitive rate or at all. Mergers or consolidations of technology companies could reduce further the number of our customers/tenants and potential customers/tenants and make us more dependent on a more limited number of customers. If our customers merge with or are acquired by other entities that are not our customers, they may discontinue or reduce the use of our

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data centers in the future. Our financial condition, results of operations, and cash flow for distributions could be materially adversely affected as a result of any or all of these factors.

We expect certain of the leases we have with our customers to expire each year or are on a month-to-month basis, and to contain early termination provisions. If leases with our customers are not renewed on the same or more favorable terms or are terminated early by our customers, our business, financial condition and results of operations could be substantially harmed.

Customers for our data centers and towers we own or expect to own may not renew their leases upon expiration. This risk is increased to the extent our customer leases expire on an annual basis. Upon expiration, our customers may elect not to renew their leases or renew their leases at lower rates, for less space, for fewer services or for shorter terms. If we are unable to successfully renew or continue our customer leases on the same or more favorable terms or subsequently re-lease available data center space when such leases expire, our business, financial condition and results of operations could be adversely affected. In addition, certain of our leases may contain early termination provisions that allow our customers to reduce the term of their leases subject to payment of an early termination charge that is often a specified portion of the remaining rent payable on such leases. The exercise by customers of early termination options could have an adverse effect on our business, financial condition and results of operations.

The infrastructure of the data centers that we own or expect to own may become obsolete, which could materially and adversely impact our revenue and operations.

Data centers require infrastructure, such as power and cooling systems, that is difficult and costly to upgrade. If the infrastructure in our data centers becomes obsolete due to the development of new server technologies, we may need to upgrade or change the systems in our data centers in order to keep our existing tenants or attract new tenants. We may not be able to effectively or efficiently upgrade or change our data center infrastructure, and may incur substantial costs in doing so. Any inability to upgrade or change our data center infrastructure in connection with technological developments may result in the loss of tenants and adversely impact our ability to attract new tenants, all of which could materially and adversely impact our revenues and operations.

Digital infrastructure and real estate investments are subject to substantial government regulation.

Digital infrastructure and real estate investments are subject to substantial government regulation related to the acquisition and operation of such investments. Failure to comply with applicable government regulations or the inability to obtain or maintain any required government permits, licenses, concessions, leases or contracts needed to operate the digital infrastructure and real estate investments we own or expect to own, could adversely affect our ability to achieve our investment objectives. In addition, governments often have considerable discretion to implement regulations that could affect the business of digital infrastructure and real estate investments in we invest or expect to invest. Changes in existing regulations could be costly for us to comply with, and may delay or prevent the operation of our assets, all of which could adversely impact the performance of our investments.

We often pursue investment opportunities that involve business, regulatory, legal or other complexities and the failure to successfully manage such risks could have a material adverse effect on our business, results of operations and financial condition.

We often pursue unusually complex investment opportunities involving substantial business, regulatory or legal complexity that would deter other investors. Our tolerance for complexity presents risks, as such transactions can be more difficult, expensive and time-consuming to finance and execute, it can be more difficult to manage or realize value from the assets acquired in such transactions, and such transactions sometimes entail a higher level of regulatory scrutiny or a greater risk of contingent liabilities. Failure to successfully manage these risks could have a material adverse effect on our business, results of operations and financial condition.

Many of our investments may be illiquid and we may not be able to vary our investment portfolio in response to changes in economic and other conditions.

Equity investments in real estate, as well as investments in mortgage-related assets, are relatively illiquid. As a result, our ability to vary our investment portfolio promptly in response to changed economic and other conditions is limited, which could adversely affect our financial condition and results of operations and our ability to pay dividends and make distributions. In addition, the liquidity of our investments may also be impacted by, among other things, restrictions on a REIT’s ability to dispose of properties that are not applicable to other types of real estate companies, other legal or contractual restrictions, the lack of available financing for assets, the absence of a willing buyer or an established market and turbulent market conditions. The illiquidity of our investments may make it difficult for us to sell such investments at advantageous times or in a timely manner if the need or desire arises, including, if necessary, to maintain our status as a REIT or to maintain our exemption from the 1940 Act. If we are required to liquidate all or a portion of our portfolio quickly,

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we may realize significantly less than the value at which we have previously recorded our assets. If and to the extent that we use leverage to finance our investments that are or become liquid, the adverse impact on us related to trying to sell assets in a short period of time for cash could be greatly exacerbated.

Risks Related to Our Organizational Structure and Business Operations

We depend on our key personnel, and the loss of their services or the loss of investor confidence in such personnel could have a material adverse effect on our business, results of operations and financial condition.

We depend on the efforts, skill, reputations and business contacts of our key personnel, including our executive officers, which include our Executive Chairman, Thomas J. Barrack, Jr., and our Chief Executive Officer and President, Marc C. Ganzi, in particular, and the services of the other members of our senior management team, including Jacky Wu, Ronald M. Sanders and Sonia Kim, each of whom (other than Ms. Kim) has entered into an employment agreement with us. For instance, the extent and nature of the experience of our executive officers and the nature of the relationships they have developed with real estate professionals, financial institutions, investors in certain of our investment vehicles and other members of the business community are critical to the success of our business. Changes to our management team have occurred in the past, and we cannot assure stockholders that further changes will not be made. We also cannot assure stockholders of the continued employment of these individuals with the Company.

In addition, the success of our digital transformation depends, to a significant extent, upon the continued services of DBH’s key personnel, including Mr. Ganzi and Benjamin Jenkins, DBH’s co-founder and Chief Investment Officer of Digital Colony. Although Mr. Ganzi and Mr. Jenkins received equity interests in us, and are subject to employment agreements and other agreements containing restrictions on engaging in activities that are deemed competitive to our business, there can be no assurances that they will continue employment with us. The loss of Mr. Ganzi, Mr. Jenkins or other DBH personnel could harm our digital real estate business and negatively impact our ability to execute our digital transformation.

In addition, certain of our key personnel have been and may continue to be the subject of media attention, which includes scrutiny or criticism of our Company, business and leadership. Such attention and scrutiny could negatively impact our reputation as well as that of our key personnel, which could in turn negatively impact the relationships our key personnel have with current and potential investors, business partners, vendors and employees. Negative perceptions of or a loss of investor confidence in our key personnel could adversely impact our business prospects.

There may be conflicts of interest between us and our Chief Executive Officer and certain other senior DBH employees that could result in decisions that are not in the best interests of our stockholders.

Prior to our combination with DBH, Marc C. Ganzi, our Chief Executive Officer and President, and Benjamin Jenkins, the Chief Investment Officer of Digital Colony, made personal investments in certain portfolio companies and/or related vehicles (collectively, the "DBH Portfolio Companies"), which DBH acquired along with a consortium of third party investors. In the DBH combination, we acquired the contracts to provide investment advisory and other business services to the DBH Portfolio Companies, while Mr. Ganzi and Mr. Jenkins retained their respective investments in the DBH Portfolio Companies. As a result of these personal investments and related outside business activities, Mr. Ganzi, Mr. Jenkins and certain other senior DBH employees may have control, veto rights or significant influence over, or be required to represent the interests of certain third party investors in, major decisions and other operational matters at the DBH Portfolio Companies. In addition, Mr. Ganzi, Mr. Jenkins and certain other DBH employees may be entitled to receive carried interest payments from the DBH Portfolio Companies upon the occurrence of certain events. As a result, Mr. Ganzi, Mr. Jenkins, and certain other senior DBH employees, may have different objectives than us regarding the performance and management of, transactions with or investment allocations to, the DBH Portfolio Companies. The Company has attempted, and will continue to attempt, to manage and mitigate actual or potential conflicts of interest between us, on the one hand, and Mr. Ganzi, Mr. Jenkins and certain other senior DBH employees, on the other hand; however, there can be no assurances that such attempts will be effective.

As a result of these personal investments, in connection with our DataBank acquisition in December 2019 and Vantage SDC acquisition in July 2020, Mr. Ganzi and Mr. Jenkins received approximately $30 million in aggregate payments, portions of which were invested into Vantage SDC alongside the Company and its co-investors. In such transactions, the Company took a series of steps to mitigate the conflicts in the transactions, including, among others, receiving a fairness opinion on the Company's purchase price from a nationally recognized third party valuation firm and obtaining approval from its board of directors. In certain of these transactions, the Company entered into agreements with Mr. Ganzi and Mr. Jenkins to provide the Company with voting rights and required that such payments received by Mr. Ganzi and Mr. Jenkins be subject to multi-year lockups and/or be re-invested in the transaction. For additional information regarding the DataBank and Vantage SDC acquisitions, see Note 20. Transactions with Affiliates, in the Company’s consolidated financial statements.

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As the Company continues its digital transformation and subject to our Code of Business Conduct and Ethics and related party transaction policies and procedures as applicable, we may continue to enter into transactions or other arrangements with the DBH Portfolio Companies in which there are actual or potential conflicts of interests between us and Mr. Ganzi, Mr. Jenkins and certain other senior employees. Despite having related party policies and procedures in place and having conflict mitigants in such transactions, such transactions may not be on terms as favorable to us as they would have been if they had been negotiated among unrelated parties. In addition, such transactions may result in future conflicts of interest if Mr. Ganzi's or Mr. Jenkins' continuing interests in the transaction (if any) are not aligned with the Company's.

We have been and may continue to be subject to the actions of activist stockholders, which could cause us to incur substantial costs, divert management's attention and resources, and have an adverse effect on our business.

We have been and may continue to be the subject of increased activity by activist stockholders. Responding to stockholder activism can be costly and time-consuming, disrupt our operations and divert the attention of management and our employees from executing our business plan. In 2019 and 2020, we entered into cooperation agreements with Blackwells Capital, LLC ("Blackwells Capital"), an activist investor, pursuant to which, among other things, we appointed an aggregate of four new independent directors to our board of directors. In addition, in connection with the 2020 cooperation agreement, we entered into a joint venture arrangement with Blackwells Capital, to acquire, hold and dispose of the Company’s stock and pursuant to which the Company contributed $14.7 million of its previously repurchased class A common stock. Activist campaigns can create perceived uncertainties as to our future direction, strategy or leadership and may result in the loss of potential business opportunities, harm our ability to attract new investors, tenants/operators/managers and joint venture partners, cause us to incur increased legal, advisory and other expenses and cause our stock price to experience periods of volatility or stagnation. Moreover, if individuals are elected to our board of directors with a specific agenda, even though less than a majority, our ability to effectively and timely implement our current initiatives and execute on our long-term strategy may be adversely affected. We are particularly susceptible to the adverse effects of stockholder activism as we continue to executing on our digital transformation. Furthermore, there are circumstances in which our revolving credit facility could terminate and/or accelerate and various change of control payments could arise as a result of the conclusion of a proxy fight.

Our assets may continue to be subject to impairment charges, which could have a material adverse effect on our results of operations.

We evaluate our long-lived assets, primarily real estate held for investment, for impairment periodically or whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. In evaluating and/or measuring impairment, the Company considers, among other things, current and estimated future cash flows associated with each property, market information for each sub-market and other quantitative and qualitative factors. Another key consideration in this assessment is the Company's assumptions about the highest and best use of its real estate investments and its intent and ability to hold them for a reasonable period that would allow for the recovery of their carrying values. These key assumptions are subjective in nature and could differ materially from actual results if the property was disposed. Changes in our strategy or changes in the marketplace may alter the hold period of an asset or asset group, which may result in an impairment loss, and such loss could be material to our financial condition or operating performance. If, after giving effect to such changes, we conclude that the carrying values of such assets or asset groups are no longer recoverable, we may recognize impairments in future periods equal to the excess of the carrying values over the estimated fair value. For example, in 2020, we recognized an aggregate of $1.96 billion in impairment of real estate, predominantly related to our hospitality and wellness infrastructure portfolios. See Note 4 to our consolidated financial statements for additional information regarding such impairments. Further, as the Company continues to shift its strategy to focus on the digital industry, we have and may continue to determine to sell our non-digital related assets sooner than we would have otherwise done so, which may result in taking impairment charges on such assets. Such impairments could have a material adverse effect on our results of operations.

In addition, we have and may continue to recognize impairments on the Company's equity method investments and goodwill. For example, given the prolonged period of time that the carrying value of our investment in CLNC had exceeded its market value, we recognized an $275 million other-than-temporary impairment on its CLNC investment in the second quarter 2020. The foregoing impairment was in addition to the $228 million other-than-temporary impairment on its CLNC investment recognized in the second quarter 2019. In addition, during 2020, we recognized an aggregate of $594 million in impairments to our other investment management goodwill. See Note 7 to our consolidated financial statements for additional information regarding such impairments. Further, the remaining value of our other investment management business goodwill is attributable to our credit management business. As we accelerate our digital transformation, we may fully write off such remaining other investment management business goodwill upon an exit of the credit management business.

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These subjective assessments have a direct impact on our net income because recording an impairment charge results in an immediate negative adjustment to net income. There can be no assurance that we will not take additional charges in the future related to the impairment of our assets. Any future impairment could have a material adverse effect on our results of operations in the period in which the charge is taken.

Thomas J. Barrack, Jr., our Executive Chairman, controls a significant number of votes in any matter presented to our stockholders for approval, including the election of directors.

In connection with the acquisition on April 2, 2015 by Colony’s operating partnership of substantially all of the real estate and investment management businesses and operations of Colony Capital, LLC ("CCLLC"), Mr. Barrack was issued shares of Colony's class B common stock which had additional voting rights. In the Merger, such Colony class B common stock was exchanged for shares of our class B Common Stock. Mr. Barrack controls a significant number of votes in matters submitted to a vote of stockholders, including the election of directors, as a result of his beneficial ownership of our class B Common Stock. Mr. Barrack may have interests that differ from our other stockholders and may vote in ways that may not be consistent with the interests of those other stockholders.

Our tax protection and related agreements could limit our ability to sell certain properties, engage in a strategic transaction or reduce our level of indebtedness, which could materially and adversely affect us.

At the closing of the Merger, CCLLC, CCH Management Partners I, LLC, FHB Holding LLC and Richard B. Saltzman (the Company's former Chief Executive Officer), each of which we refer to as a protected member, entered into a tax protection agreement with the Company and the OP (the "TPA"). The TPA provides that each protected member is indemnified on an after-tax basis for any Section 704(c) gain, calculated as provided in the TPA, as a result of a transaction occurring during the period commencing on June 3, 2016 and ending on January 10, 2022 (i.e., the fifth anniversary of the closing of the Merger) (the "Tax Protection Period") and that is considered to be a sale of the tax goodwill, going concern value or airplane owned by the OP and contributed (directly or indirectly) by such protected members, which we refer to, collectively, as the protected property, other than on transfers to the protected members or persons or entities related to the protected members. The TPA also applies to a merger or other transaction that would convert interests in the OP held by the protected members to cash or otherwise result in a taxable disposition of such interests, but does not apply to a transaction in which the equity interests of the protected members are maintained in a manner that does not trigger gain or offers the protected members the option to roll over their investment into an equity interest that is substantially equivalent (including value, profit and loss share, distribution rights and liquidity) to the equity interests exchanged in such transaction.

If our tax indemnification obligations are triggered under these agreements, we will be required to pay damages for the resulting tax consequences to the protected members and the calculation of damages will not be based on the time value of money or the time remaining within the restricted period. Moreover, these obligations may restrict our ability to engage in a strategic transaction. As of December 31, 2020, the OP estimates that if all of its assets subject to the TPA are sold in a taxable transaction, its indemnification obligations (based on tax rates applicable for the taxable year ended December 31, 2020 and exchange values and including additional payments to compensate the protected members for additional tax liabilities resulting from the indemnification payments) could be up to $80 million.

In addition, these and related obligations may require us to maintain more or different indebtedness than we would otherwise require for our business. For example, the TPA requires that the OP maintain at least $1.05 billion of certain non-recourse liabilities during the Tax Protection Period.

The occurrence of a security breach or a deficiency in our cybersecurity has the potential to disrupt our operations, cause material harm to our financial condition, result in misappropriation of assets, compromise confidential information and/or damage our business relationships.

As an asset manager, our business is highly dependent on information technology networks and systems, including systems provided by third parties over which we have no control. We may also have limited opportunity to verify the effectiveness of systems provided by third parties or to cause third parties to implement necessary or desirable improvements for such systems. In the normal course of business, we and our service providers process proprietary, confidential, and personal information provided by our tenants, employees, and vendors. The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusions, including by computer hackers, nation-state affiliated actors, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. A security breach or a significant and extended disruption to our systems and, in particular, systems provided by third parties, may result in compromise or corruption of, or unauthorized access to, proprietary, confidential, or personal information collected in the course of conducting our business; misappropriation of assets; disruption of our operations, material harm to our financial condition, cash flows, and the market price of our common shares, significant remediation expenses; and increased cybersecurity protection and insurance costs. A security

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breach or disruption could also interfere with our ability to comply with financial reporting requirements, loss of competitive position, regulatory actions, litigation, breach of contracts, reputational harm, damage to our stakeholder relationships, or legal liability.

These risks require continuous and likely increasing attention and other resources from us to, among other actions, identify and quantify these risks; upgrade and expand our technologies, systems, and processes to adequately address them; and provide periodic training for our employees to assist them in detecting phishing malware, and other schemes. This diverts time and resources from other activities. Although we make efforts to maintain the security and integrity of our networks and systems, and the proprietary, confidential and personal information that resides on or is transmitted through them, and we have implemented various cyber security policies, procedures capabilities to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging.

We may not realize the anticipated benefits of our strategic partnerships and joint ventures.

We have and may continue to enter into strategic partnerships and joint ventures to support growth in our business. We may also make investments in partnerships or other co-ownership arrangements or participations with third parties. In connection with our investments, our partners provide, among other things, property management, investment advisory, sub-advisory and other services to us and certain of the companies that we manage. We may not realize any of the anticipated benefits of our strategic partnerships and joint ventures. Such investments and any future strategic partnerships and/or joint ventures subject us and the companies we manage to risks and uncertainties not otherwise present with other methods of investment.

For a substantial portion of our assets, we rely upon joint venture partners to manage the day-to-day operations of the joint venture and underlying assets, as well as to prepare financial information for the joint venture. Any failure to perform these obligations may have a negative impact on our financial performance and results of operations. In addition, the terms of the agreements with our partners may limit or restrict our ability to make additional capital contributions for the benefit of properties or to sell or otherwise dispose of properties or interests held in joint ventures, even for ventures where we are the controlling partner. In certain instances, we may not control our joint venture investments. In these ventures, the controlling partner(s) may be able to take actions which are not in our best interests or the best interests of the investments we manage. Furthermore, to the extent that our joint venture partner provides services to the companies we manage, certain conflicts of interest will exist. Moreover, we may decide to terminate a strategic relationship or joint venture partner, which could be costly and time-consuming for our management team.

Any of the above might subject us to liabilities and thus reduce our returns on our investment with that joint venture partner, which in turn may have an adverse effect on our financial condition and results of operations. In addition, disagreements or disputes between us and our joint venture partner(s) could result in litigation, which could increase our expenses and potentially limit the time and effort our officers and directors are able to devote to our business.

We are subject to substantial litigation risks and may face significant liabilities and damage to our professional reputation as a result of litigation allegations and negative publicity.

In the ordinary course of business, we are subject to the risk of substantial litigation and face significant regulatory oversight. Such litigation and proceedings, including, among others, regulatory actions and shareholder class action suits relating to transactions in which we have agreed to acquire public companies, may result in defense costs, settlements, fines or judgments against us, some of which may not be covered by insurance. Litigation could be more likely in connection with a change of control transaction or during periods of market dislocation, shareholder activism or proxy contests. In 2018 and 2020, several class action lawsuits and related derivative actions were filed against our Company and certain of our current and former executive officers and directors alleging certain violations of securities laws and omissions or misstatements regarding disclosures made in connection with our business and/or the 2017 merger of our predecessor entities. The 2018 and 2020 lawsuits were dismissed with prejudice; however, we cannot guarantee that additional lawsuits will not be filed against us in the future. Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such litigation or proceedings. An unfavorable outcome could negatively impact our cash flow, financial condition, results of operations and trading price of our shares of class A common stock.

In addition, even in the absence of misconduct, we may be exposed to litigation or other adverse consequences where investments perform poorly and investors in or alongside our managed companies experience losses. We depend to a large extent on our business relationships and our reputation for integrity and high-caliber professional services to attract and retain investors and to pursue investment opportunities for us and our managed companies. As a result, allegations of improper conduct by private litigants (including investors in or alongside our managed companies) or regulators, whether the ultimate outcome is favorable or unfavorable to us, as well as negative publicity and press

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speculation about us, our investment activities or the private equity industry in general, whether or not valid, may harm our reputation, which may be more damaging to our business than to other types of businesses.

Our cost reduction programs may not be effective, might have unintended consequences and could negatively impact our business.

In recent years, we have implemented cost reduction programs to reduce annual compensation and administrative expenses. In connection with our most recent cost reduction program in 2020, we achieved annual run-rate cost savings of approximately $55 million, but also incurred approximately $30 million in related charges through December 31, 2020. To the extent we continue to initiate cost reduction programs to further our annual compensation and administrative cost savings, we may incur additional restructuring charges.

As a result of cost reduction programs, we have and may continue to face a variety of risks and uncertainties relating to the effectiveness of such activities. Despite our planning, our cost reduction programs could have unexpected negative consequences. As part of our workforce reduction, we may experience additional attrition, which may expose us to legal claims against us and loss of necessary human resources, which could adversely impact our ability to conduct our operations effectively. If we face costly employee or contract termination claims, our operations and prospects could be harmed. In addition, there can be no assurance that the cost reductions we have made will be successful or are the right reductions for our business going forward. There is a risk that the cost savings initiatives, restructurings and reductions in personnel will make it more difficult to conduct our business and operations.

Risks Related to Financing

We may not be able to generate sufficient cash flow to meet all of our existing or potential future debt service obligations.

Our ability to meet all of our existing or potential future debt service obligations (including those under our revolving credit facility, pursuant to which we may incur significant indebtedness), to refinance our existing or potential future indebtedness, and to fund our operations, working capital, acquisitions, capital expenditures, and other important business uses, depends on our ability to generate sufficient cash flow in the future. Our future cash flow is subject to, among other factors, general economic, industry, financial, competitive, operating, legislative, and regulatory conditions, many of which are beyond our control.

We cannot assure you that our business will generate sufficient cash flow from operations or that future sources of cash will be available to us on favorable terms, or at all, in amounts sufficient to enable us to meet all of our existing or potential future debt service obligations, or to fund our other important business uses or liquidity needs. Furthermore, if we incur additional indebtedness in connection with future acquisitions or for any other purpose, our existing or potential future debt service obligations could increase significantly and our ability to meet those obligations could depend, in large part, on the returns from such acquisitions or projects, as to which no assurance can be given.

Furthermore, our obligations under the terms of our borrowings could impact us negatively. For example, such obligations could:

•limit our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes;

•restrict us from making strategic acquisitions or cause us to make non-strategic divestitures;

•restrict us from paying dividends to our stockholders;

•increase our vulnerability to general economic and industry conditions; and

•require a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our borrowings, thereby reducing our ability to use cash flow to fund our operations, capital expenditures and future business opportunities.

We may also need to refinance all or a portion of our indebtedness at or prior to the scheduled maturity. Our ability to refinance our indebtedness or obtain additional financing will depend on, among other things, (i) our business, financial condition, liquidity, results of operations, core funds from operations ("Core FFO") prospects, and then-current market conditions; and (ii) restrictions in the agreements governing our indebtedness. As a result, we may not be able to refinance any of our indebtedness or obtain additional financing on favorable terms, or at all.

If we do not generate sufficient cash flow from operations and additional borrowings or refinancings are not available to us, we may be unable to meet all of our existing or potential future debt service obligations. As a result, we would be

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forced to take other actions to meet those obligations, such as selling properties, raising equity or delaying capital expenditures, any of which could have a material adverse effect on us. Furthermore, we cannot assure you that we will be able to effect any of these actions on favorable terms, or at all.

Changes in the debt financing markets could negatively impact our ability to obtain attractive financing or re-financing for our investments and could increase the cost of such financing if it is obtained, which could lead to lower-yielding investments and potentially decrease our net income.

A significant contraction in the market for debt financing, such as the contraction that occurred in 2008 and 2009, or other adverse changes relating to the terms of such debt financing with, for example, higher interest rates, higher capital requirements and/or more restrictive covenants, particularly in the area of acquisition financings for leveraged buyout and real assets transactions, could have a material adverse impact on our business. In the event that we are unable to obtain committed debt financing for potential acquisitions or can only obtain debt at an increased interest rate or on unfavorable terms, we may have difficulty completing otherwise profitable acquisitions or may generate profits that are lower than would otherwise be the case, either of which could lead to a decrease in the income earned by us. Similarly, we regularly utilize the corporate debt markets in order to obtain financing for our operations. To the extent that the credit markets render such financing difficult to obtain or more expensive, this may negatively impact our operating performance. In addition, to the extent that the markets make it difficult or impossible to refinance debt that is maturing in the near term, we may be unable to repay such debt at maturity and may be forced to sell assets, undergo a recapitalization or seek bankruptcy protection.

Increases in interest rates could adversely affect the value of our investments and cause our interest expense to increase, which could result in reduced earnings or losses and negatively affect our profitability as well as the cash available for distribution to our stockholders.

The value of our investments in certain assets may decline if long-term interest rates increase. Declines in the value of our investments may ultimately reduce earnings or result in losses to us, which may negatively affect cash available for distribution to our stockholders. Significant increases in interest rates may, among other things, increase the credit risk of our assets by negatively impacting the ability of the borrowers to pay debt service on our floating rate loan assets or our ability to refinance our assets upon maturity, negatively impact the value of the real estate collateralizing our investments (or the real estate we own directly) through the impact such increases can have on property valuation capitalization rates and decrease the value of our fixed-rate debt investments.

In addition, in a period of rising interest rates, our operating results will partially depend on the difference between the income from our assets and financing costs. We anticipate that, in some cases, the income from such assets will respond more slowly to interest rate fluctuations than the cost of our borrowings. Consequently, changes in interest rates, particularly short-term interest rates, may significantly influence our net interest income, which is the difference between the interest income we earn on our interest-earning investments and the interest expense we incur in financing these investments. Increases in these rates could decrease our net income and the market value of our assets.

Rising interest rates may also affect the yield on our investments or target investments and the financing cost of our debt. If rising interest rates cause us to be unable to acquire a sufficient volume of our target investments with a yield that is above our borrowing cost, our ability to satisfy our investment objectives and to generate income and pay dividends may be materially and adversely affected. Due to the foregoing, significant fluctuations in interest rates could materially and adversely affect our results of operations, financial conditions and our ability to make distributions to our stockholders.

The future of the reference rate used in our existing floating rate debt instruments and hedging arrangements is uncertain, which could hinder our ability to maintain effective hedges and could adversely impact our business operations and financial results.

Our floating-rate debt, certain senior and junior subordinated notes and certain hedging transactions determine the applicable interest rate or payment amount by reference to a benchmark rate, such as the London Interbank Offered Rate (“LIBOR”), or to another financial metric. In July 2017, the Chief Executive of the U.K. Financial Conduct Authority (“FCA”) announced that the FCA intends to stop persuading or compelling banks to submit rates for the calculation of LIBOR after 2021. On November 30, 2020, ICE Benchmark Administration Limited (“IBA”), announced that it will consult on its intention to cease the publication of the one week and two month USD LIBOR settings after December 31, 2021, and the remaining USD LIBOR settings after June 30, 2023. This consultation closed on January 25, 2021 and may result in a statement that clarifies the expected timing for LIBOR discontinuation; however, the results of the consultation are not yet known. In addition, notwithstanding the IBA announcement, the United States Federal Reserve along with other banking regulators issued a statement advising banks to lay out a plan to stop writing new LIBOR contracts by the end of 2021.

In light of these recent announcements, the future of LIBOR is uncertain and any changes in the methods by which USD LIBOR is determined or regulatory activity related to USD LIBOR’s phaseout could cause USD LIBOR to perform

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differently than in the past or cease to exist. Despite progress made to date by regulators, banks and industry and market participants to prepare for the anticipated discontinuation of LIBOR, including on proposals for replacement reference rates such as the Secured Overnight Financing Rate (“SOFR”), significant uncertainties remain regarding the future of LIBOR. Such uncertainties relate to, for example, whether LIBOR will continue to be viewed as an acceptable market benchmark rate, what rate or rates may become accepted alternatives to LIBOR, how any replacement would be implemented across the industry, and the effect of any changes in industry views or movement to alternative benchmarks would have on the markets for LIBOR-linked financial instruments.

We can provide no assurance regarding the future of LIBOR and when our current floating rate debt instruments and hedging arrangements will transition from LIBOR as a reference rate to SOFR or another reference rate. To date we have taken steps intended to minimize disruption in our business operations in the event of LIBOR discontinuation, including, where possible, by providing mechanisms in our LIBOR based instruments that permit or facilitate the movement from LIBOR to replacement benchmarks upon the occurrence of certain defined events occur related to the discontinuation of LIBOR. However, there can be no assurances that such steps will successfully minimize disruption or result in any of the benefits we anticipate. The discontinuation of a benchmark rate or other financial metric, changes in a benchmark rate or other financial metric, or changes in market perceptions of the acceptability of a benchmark rate or other financial metric, including LIBOR, could, among other things, result in increased interest payments, changes to our risk exposures, or require renegotiation of previous transactions. In addition, any such discontinuation or changes, whether actual or anticipated, could result in market volatility, adverse tax or accounting effects, increased compliance, legal and operational costs, and risks associated with contract negotiations. Further, confusion related to the transition from USD-LIBOR to SOFR or another replacement reference rate for our floating debt and hedging instruments could have an uncertain economic effect on these instruments, hinder our ability to establish effective hedges and result in a different economic value over time for these instruments than they otherwise would have had under USD-LIBOR, any of which could adversely impact our business operations and financial results.

Risks Related to Ownership of Our Securities

The market price of our class A common stock has been and may continue to be volatile and holders of our class A common stock could lose all or a significant portion of their investment due to drops in the market price of our class A common stock.

The market price of our class A common stock has been and may continue to be volatile. Our stockholders may not be able to resell their common stock at or above the implied price at which they acquired such common stock pursuant to the merger agreement or otherwise due to fluctuations in the market price of our class A common stock, including changes in market price caused by factors unrelated to our operating performance or prospects. Additionally, this volatility and other factors have and may continue to induce stockholder activism, which has been increasing in publicly traded companies in recent years and to which we have and continue to be subject, and could materially disrupt our business, operations and ability to make distributions to our stockholders.

Specific factors that may have a significant effect on the market price of our class A common stock include, among others, the following:

•changes in stock market analyst recommendations or earnings estimates regarding our class A common stock, other companies comparable to it or companies in the industries we serve;

•actual or anticipated fluctuations in our operating results or future prospects;

•reactions to public announcements by us;

•changes in our dividend policy;

•impairment charges affecting the carrying value of one or more of our investments;

•media attention about our Company or our management team;

•strategic actions taken by our Company or our competitors, such as business separations, acquisitions or restructurings;

•failure of our Company to achieve the perceived benefits of certain transactions and restructurings, including financial results and anticipated cost savings and synergies, as rapidly as or to the extent anticipated by financial or industry analysts;

•changes or other announcements regarding our key management personnel;

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•adverse conditions in the financial market or general U.S. or international economic conditions, including those resulting from war, incidents of terrorism, outbreaks of disease and epidemics, such as the Coronavirus, and responses to such events; and

•sales of common stock by our Company, members of our management team or significant stockholders.

We may issue additional equity securities, which may dilute your interest in us.

In order to expand our business, we may consider offering class A common stock and securities that are convertible into our class A common stock and may issue additional common stock in connection with acquisitions or joint ventures. If we issue and sell additional shares of our class A common stock, the ownership interests of our existing stockholders will be diluted to the extent they do not participate in the offering. The number of shares of class A common stock that we may issue for cash in non-public offerings without stockholder approval will be limited by the rules of the NYSE. However, we may issue and sell shares of our class A common stock in public offerings, and there generally are exceptions that allow companies to issue a limited number of equity securities in private offerings without stockholder approval, which could dilute your ownership. In July 2020, the OP issued $300 million in aggregate principal balance of 5.75% exchangeable senior notes due 2023, which are exchangeable by the noteholder at any time prior to maturity into shares of our class A common stock. The initial exchange rate, which is subject to adjustment upon the occurrence of certain events, was 434.7826 shares of class A common stock per $1,000 principal amount of notes and represented a conversion price of $2.30 per share of class A common stock. To the extent we issue shares of our class A common stock upon exchange of the notes, the exchange of some or all of our notes will substantially dilute the ownership interests of existing stockholders. Any sales in the public market of shares of our class A common stock issuable upon such exchange of the notes could adversely affect the prevailing market price.

In addition, we have and may continue to issue OP Units in the OP to current employees or third parties without stockholder approval. During 2019, we issued an aggregate of 22,090,587 OP Units, representing approximately 4.5% of our outstanding class A common stock, primarily in connection with our acquisition of DBH and ownership interest in an edge data center company. Subject to any applicable vesting or lock-up restrictions and pursuant to the terms and conditions of the OP agreement, a holder of OP Units may elect to redeem such OP Units for cash or, at the Company's option, shares of our class A common stock on a one-for-one basis. As a result of such OP Unit issuances and potential future issuances, your ownership will be diluted.

Our board of directors may modify our authorized shares of stock of any class or series and may create and issue a class or series of common stock or preferred stock without stockholder approval.

Our Articles of Amendment and Restatement (our "Charter") authorizes our board of directors to, without stockholder approval, classify any unissued shares of common stock or preferred stock; reclassify any previously classified, but unissued, shares of common stock or preferred stock into one or more classes or series of stock; and issue such shares of stock so classified or reclassified. Our board of directors may determine the relative rights, preferences, and privileges of any class or series of common stock or preferred stock issued. As a result, we may issue series or classes of common stock or preferred stock with preferences, dividends, powers, and rights (voting or otherwise) senior to the rights of current holders of our class A common stock. The issuance of any such classes or series of common stock or preferred stock could also have the effect of delaying or preventing a change of control transaction that might otherwise be in the best interests of our stockholders.

Risks Related to Our Incorporation in Maryland

The stock ownership limits imposed by the Code for REITs and our Charter may restrict our business combination opportunities.

In order for us to maintain our qualification as a REIT under the Code, not more than 50% in value of our outstanding stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) at any time during the last half of each taxable year following our first year. Our Charter, with certain exceptions, authorizes our board of directors to take those actions that are necessary and desirable to preserve our qualification as a REIT. In order to assist us in complying with the limitations on the concentration of ownership of REIT stock imposed by the Code, our Charter generally prohibits any person (other than a person who has been granted an exemption) from actually or constructively owning more than 9.8% of the aggregate of the outstanding shares of our capital stock (as defined in our Charter) by value or 9.8% of the aggregate of the outstanding shares of our common stock (as defined in our Charter) by value or by number of shares, whichever is more restrictive. Our board of directors may, in its sole discretion, grant an exemption to the ownership limits, subject to certain conditions and the receipt by our board of directors of certain representations and undertakings. The ownership limits imposed under the Code are based upon direct or indirect ownership by “individuals,” but only during the last half of a tax year. The ownership limits contained in our Charter are

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based on the ownership at any time by any “person,” which term includes entities. These ownership limitations are common in REIT charters and are intended to provide added assurance of compliance with the tax law requirements, and to minimize administrative burdens. However, the ownership limit on our common stock might also delay or prevent a transaction or a change in our control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders, and the proposed reduction in the ownership limit could further restrict such transactions that may otherwise not be so delayed or prevented.

Certain provisions of Maryland law could inhibit changes in control.

Certain provisions of the Maryland General Corporation Law ("MGCL") may have the effect of inhibiting a third party from making a proposal to acquire us or impeding a change of control that could provide our stockholders with the opportunity to realize a premium over the then-prevailing market price of our common stock, including:

•“business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our outstanding voting stock), or an affiliate thereof, for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter imposes special appraisal rights and supermajority voting requirements on these combinations; and

•“control share” provisions that provide that holders of “control shares” of our company (defined as voting shares which, when aggregated with all other shares owned or controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.

The statute permits various exemptions from its provisions, including business combinations that are exempted by a board of directors prior to the time that the “interested stockholder” becomes an interested stockholder. Our board of directors has, by resolution, exempted any business combination between us and any person who is an existing, or becomes in the future, an “interested stockholder,” provided that any such business combination is first approved by our board of directors (including a majority of the directors of our company who are not affiliates or associates of such person). Consequently, the five-year prohibition and the supermajority vote requirements will not apply to business combinations between us and any such person. As a result, such person may be able to enter into business combinations with us that may not be in the best interest of our stockholders, without compliance with the supermajority vote requirements and the other provisions of the statute. Additionally, this resolution may be altered, revoked or repealed in whole or in part at any time and we may opt back into the business combination provisions of the MGCL. If this resolution is revoked or repealed, the statute may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer. In the case of the control share provisions of the MGCL, we have elected to opt out of these provisions of the MGCL pursuant to a provision in our bylaws.

Conflicts of interest may exist or could arise in the future with the OP and its members, which may impede business decisions that could benefit our stockholders.

Conflicts of interest may exist or could arise as a result of the relationships between us and our affiliates, on the one hand, and the OP or any member thereof, on the other. Our directors and officers have duties to our Company and our stockholders under applicable Maryland law in connection with their management of our Company. At the same time, the Company, as sole managing member of the OP, has fiduciary duties to the OP and to its members under Delaware law in connection with the management of the OP. Our duties to the OP and its members, as the sole managing member, may come into conflict with the duties of our directors and officers to our Company and our stockholders. As of the date of this report, Mr. Barrack indirectly owns approximately 4.9% in the OP and Mr. Ganzi indirectly owns approximately 1.8% in the OP. These conflicts may be resolved in a manner that is not in the best interest of our stockholders.

Risks Related to Our Wellness Infrastructure Business

Approximately 28% of our real estate investments are concentrated in healthcare properties, which increases the likelihood of risks related to owning healthcare real estate properties becoming more material to our business and results of operations.

Healthcare real estate properties currently represent approximately 28% of our real estate portfolio. As a result of this concentration of healthcare real estate properties, our exposure to the risks inherent in investments in the healthcare sector has also increased, making us more vulnerable to a downturn or slowdown in the healthcare sector. We cannot be certain that our tenants, operators and managers will achieve and maintain occupancy and rate levels that will enable them to satisfy their obligations to us. We also cannot assure you that future changes in government regulation will not

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adversely affect the healthcare industry. Any adverse changes in the regulation of the healthcare industry or the competitiveness of our tenants, operators and managers could have a more pronounced effect on us than if our investments were more diversified.

We have significant leverage on our healthcare properties, which increases the risk of loss associated with our healthcare investments, impacts our liquidity and restricts our ability to engage in certain activities.

As of December 31, 2020, we had $2.7 billion of borrowings outstanding on our healthcare properties. Use of leverage increases our risk of loss, impacts our liquidity and restricts our ability to engage in certain activities, including our ability to implement certain strategic initiatives or dispose of certain assets. If we fail to comply with the covenants required by our borrowings or do not generate sufficient cash flow to service our borrowings, our liquidity may be materially and adversely affected. We have been, and may in the future be, in default, on the non-recourse borrowings associated with our healthcare properties as a result of the failure of our operators or managers to satisfy certain performance thresholds or other covenants. In particular, if certain of our operators continue to experience operating difficulties, our ability to comply with our obligations under our borrowings may be subject to additional stress. As a result of these defaults or if we default on additional borrowings, we may be required to repay outstanding obligations, including penalties, prior to the stated maturity, be subject to cash flow sweeps or potentially have assets foreclosed upon. In addition, we may be unable to refinance borrowings when they become due on favorable terms, at similar interest rate levels, or at all, which could have a material adverse impact on our results of operations.

We do not control the operations of our senior housing, skilled nursing and other wellness infrastructure assets and are therefore dependent on the operators and managers, as applicable, of these properties to successfully operate their businesses.

Our senior housing, skilled nursing and other wellness infrastructure assets are typically operated by healthcare operators pursuant to net leases or by independent third party managers pursuant to management agreements. As a result, we are unable to directly implement strategic business decisions with respect to the daily operation and marketing of these properties. We also rely on operators and managers to operate our properties in compliance with all applicable laws and regulations. Given the disproportionate impact that the COVID-19 pandemic has had on senior housing and skilled nursing facilities, there is a material risk that these facilities may be subject to lawsuits and administrative scrutiny for failing to take appropriate measures to comply with infection control protocols, leading to illnesses and deaths of patients, residents and staff. Even if a facility was not materially affected by the COVID-19 pandemic, the entire senior services industry is likely to experience heightened scrutiny by state and federal regulatory authorities and plaintiffs’ attorneys. While we have various rights as the property owner under our leases or management agreements and monitor the operators/managers’ performance, we may have limited recourse under our leases or management agreements if we believe that the operators/managers are not performing adequately. Failure by the operators/managers to adequately manage the risks associated with operations of these properties could result in defaults under our borrowings and otherwise affect adversely our results of operations. Furthermore, if our operators/managers experience any significant financial, legal, accounting or regulatory difficulties, such difficulties could have a material adverse effect on us.

Decreases in our operators’ revenues or increases in our operators’ expenses could negatively affect our financial results.

Our operators’ revenues are primarily driven by occupancy, private pay rates, and Medicare and Medicaid reimbursement, if applicable. Expenses for these facilities are primarily driven by the costs of labor, food, utilities, taxes, insurance, compliance activities, rent or debt service. Revenues from government reimbursement may continue to be subject to reimbursement cuts, disruptions in payment, audit and recovery actions, and state budget shortfalls. Additionally, federal and state governmental entities are considering and may impose new regulatory obligations that could increase costs, expose our operators to financial penalties or program suspension or exclusion, or limit their number of residents or patients. Operating costs, including labor costs and costs of compliance with government programs, continue to increase for our operators. To the extent that any decrease in revenues and/or any increase in operating expenses result in a property not generating sufficient cash, our operators may not be able to make payments to us. Failure of our operators to perform could result in defaults under our borrowings. As a result, we may need to negotiate new leases with our operators or replace such operators, which may subject us to significant liabilities and expense. Under these circumstances, we have recorded and may need to further record impairment for such assets. Furthermore, if we determine to dispose of an underperforming property, such sale may result in a loss. Any such impairment or loss on sale would negatively affect our financial results.

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We are directly exposed to operational risks at certain of our healthcare properties, which could adversely affect our revenue and operations.

We operate a substantial number of healthcare properties pursuant to management agreements with third party managers, whereby we are directly exposed to various operational risks with respect to these healthcare properties that may increase our costs or adversely affect our ability to generate revenues. These risks include fluctuations in occupancy, government reimbursement, if applicable, private pay rates, economic conditions, competition, federal, state, local and industry-regulated licensure, certification, fraud and abuse and privacy and security laws, regulations and standards and related audits, investigations and litigation, the availability and increases in cost of general and professional liability insurance coverage (including as a result of climate change or other natural disasters), the impact of actual and anticipated outbreaks of disease and epidemics, such as COVID-19, rent control regulations, the imposition of new or increased taxes, capital expenditure requirements, and the availability and increases in the cost of food, materials, energy, or labor (as a result of unionization or otherwise). If any of these properties does not generate sufficient revenues to cover its expenses, we are responsible for any operating shortfalls. Any one or a combination of these factors may adversely affect our revenue and operations. Refer to “Operating and Regulatory Structure—U.S. Healthcare Regulation” included in Item 1 of this Annual Report for further discussion.

Senior Lifestyles Corporation and its affiliates (“SLC”) manages a significant portion of these senior housing facilities. Because SLC manages our properties in exchange for a management fee from us, we are not exposed to its credit risk. However, failure of SLC to manage our properties efficiently and effectively could have a significant adverse impact on us. We monitor and assess numerous factors, including legal, contractual, regulatory, business and other relevant considerations, in determining whether to pursue any rights or remedies under our management agreements with SLC, including termination. If we elected to terminate the management agreements for any properties, we would attempt to reposition the properties, but there can be no assurance that we will be able to locate a suitable replacement manager or that the replacement manager would manage the properties effectively.

If we must replace any of our tenants, operators or managers, we might be unable to reposition the properties on as favorable terms, or at all, and we could be subject to delays, limitations and expenses, which could have a material adverse effect on us.

Following expiration of a lease term or if we exercise our right to replace a tenant, operator or manager in default, we will attempt to reposition properties. However, rental payments on the related properties could decline or cease altogether while we reposition the properties with a suitable replacement tenant, operator or manager. We also may not be successful in identifying suitable replacements or enter into new leases or management agreements on a timely basis or on terms as favorable to us as our current leases and management agreements, if at all, and we may be required to fund certain expenses and obligations (e.g., real estate taxes, debt costs and maintenance expenses) to preserve the value of, and avoid the imposition of liens on, our properties while they are being repositioned. In addition, we may incur certain obligations and liabilities, including obligations to indemnify the replacement tenant, operator or manager. Once a suitable replacement tenant/operator/manager has taken over operation of the properties, it may still take an extended period of time before the properties are fully repositioned and value restored, if at all. Any of these results could have a material adverse effect on our business, financial condition and results of operations.

Increased competition may affect the performance of our operating properties, as well as our operators’ ability to meet their obligations to us.

The healthcare industry is highly competitive, and our operators and managers may encounter increased competition for residents, including with respect to the scope and quality of care and services provided, reputation and financial condition, physical appearance of the properties, price and location. Our operators and managers also compete for labor, making their results sensitive to changes in the labor market and/or wages and benefits offered to their employees. If our operators and managers are unable to successfully compete with other operators and managers by maintaining profitable occupancy and rate levels or controlling labor costs, our performance may be directly or indirectly materially adversely affected, potentially decreasing our revenues or impairing our assets.

The hospitals on or near whose campuses many of our medical office buildings ("MOBs") are located and their affiliated health systems could fail to remain competitive or financially viable, which could adversely impact their ability to attract physicians and physician groups to our MOBs.

Our MOB operations depend on the competitiveness and financial viability of the hospitals on or near whose campuses our MOBs are located. The viability of these hospitals, in turn, depends on factors such as the quality and mix of healthcare services provided, competition for patients, physicians and physician groups, demographic trends in the surrounding community, market position and growth potential. A hospital’s inability to remain competitive or financially

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viable, or to attract physicians and physician groups, could materially adversely affect our MOB operations and have a material adverse effect on us.

Failure to comply with certain healthcare laws and regulations could adversely affect our operations, expose us to liability and jeopardize our tenants/operators’ abilities to meet their obligations to us.

Our wellness infrastructure assets generally are subject to varying levels of federal, state, local, and industry regulated laws, regulations and standards. Our tenants/operators/managers’ failure to comply with any of these laws, regulations or standards could result in denial of reimbursement, imposition of fines, penalties or damages, suspension, decertification or exclusion from federal and state healthcare programs, loss of license, loss of accreditation or certification, or closure of the facility. For our operating properties, our operations may be directly impacted by any such actions and expose us to liability. For our net leased properties, such actions may have an effect on our tenants/operators’ ability to meet all of their obligations to us, including obligations to make lease payments, and, therefore, adversely impact us. Refer to “Operating and Regulatory Structure—U.S. Healthcare Regulation” included in Item 1 of this Annual Report for further discussion.

Changes in the reimbursement rates or methods of payment from third-party payors, including the Medicare and Medicaid programs, could have a material adverse effect on certain of our tenants and operators and on us.

Certain of our wellness infrastructure assets rely on reimbursement from third party payors, including payments received through the Medicare and Medicaid programs, for substantially all of their revenues. Federal and state legislators and healthcare financing authorities have adopted or proposed various cost-containment measures that would limit payments to healthcare providers and have considered Medicaid rate freezes or cuts. Additionally, some states are considering changes that would affect beneficiary eligibility for Medicaid. See “Operating and Regulatory Structure—U.S. Healthcare Regulation” included in Item 1 of this Annual Report. Private third party payors also have continued their efforts to control healthcare costs. We cannot assure you that we, or our tenants and operators who currently depend on governmental or private payor reimbursement, will be adequately reimbursed for the services provided. Significant limits by governmental and private third party payors on the scope of services reimbursed or on reimbursement rates and fees, whether from legislation, administrative actions or private payor efforts, could have a material adverse effect on our liquidity, financial condition and results of operations.

Significant legal actions or regulatory proceedings could subject us or our tenants and operators to increased operating costs and substantial uninsured liabilities, which could materially adversely affect our or their liquidity, financial condition and results of operations.

We may be subject to claims brought against us in lawsuits and other legal or regulatory proceedings arising out of our alleged actions or the alleged actions of managers. From time to time, we may also be subject to claims brought against us arising out of the alleged actions of our tenants and operators and for which such tenants and operators may have agreed to indemnify, defend and hold us harmless. An unfavorable resolution of any such litigation or proceeding could materially adversely affect our or their liquidity, financial condition and results of operations and have a material adverse effect on us.

In certain cases, we and our tenants, operators and managers may be subject to professional liability claims brought by plaintiffs’ attorneys seeking significant punitive damages and attorneys’ fees. Due to the historically high frequency and severity of professional liability claims against senior housing and healthcare providers, the availability of professional liability insurance has decreased and the premiums on such insurance coverage remain costly. The number of claims of this nature may increase on account of the impact of the COVID-19 pandemic. These claims, with or without merit, could cause us to incur substantial costs, harm our reputation and adversely affect our ability to attract and retain residents, any of which could have a material adverse effect on our business, financial condition and results of operations. In particular, professional liability carriers may seek to exclude claims related to COVID-19 from coverage. As a result, insurance protection against such claims may not be sufficient to cover all claims against us or our tenants, operators or managers, and may not be available at a reasonable cost. If we or our tenants, operators and managers are unable to maintain adequate insurance coverage or are required to pay punitive damages, we or they may be exposed to substantial liabilities.

Risks Related to Our Hospitality Business

A significant portion of our real estate investments are concentrated in hotels, which increases our exposure to risks affecting the hospitality industry.

As of December 31, 2020, our hotel properties (including the THL Hotel Portfolio) represents approximately 28% of our real estate portfolio. The hospitality industry is subject to changes in the travel patterns of business and leisure travelers, both of which are affected by the strength of the economy, as well as other factors. The performance of the

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hospitality industry has traditionally been closely linked with the performance of the general economy and, specifically, growth in gross domestic product. Changes in travel patterns of both business and leisure travelers, particularly during periods of economic contraction or low levels of economic growth, may create difficulties for the industry over the long-term and adversely affect our results. The majority of our hotels are classified as upscale extended stay and upscale select service that generally target business travelers. In periods of economic difficulties, business and leisure travelers may seek to reduce travel costs by limiting travel or seeking to reduce costs on their trips. Our results of operations and any forecast we make may be affected by, and can change based on, a variety of circumstances that affect the hospitality industry, including:

•changes in the international, national, regional and local economic climate;

•changes in business and leisure travel patterns;

•increases in energy prices or airline fares or terrorist incidents, which impact the propensity of people to travel and revenues from our hospitality facilities because operating costs cannot be adjusted as quickly;

•supply growth in markets where we own hotels, which may adversely affect demand at our properties;

•the attractiveness of our hotels to consumers relative to competing hotels;

•competition and supply from alternative lodging market places in the markets in which we own hotels;

•the performance of the managers of our hotels;

•outbreaks of disease and epidemics, such as the COVID-19 pandemic, and the impact on travel of natural disasters and weather;

•physical damage to our hotels as a result of earthquakes, hurricanes, climate change or other natural disasters or the income lost as a result of the damage;

•increases in the cost or availability of property insurance for our hotel properties, as a result of climate change or other natural disaster;

• changes in room rates and increases in operating costs due to inflation, labor costs and other factors; and

•unionization of the labor force at our hotels.

A reduction in our revenue or earnings as a result of the above risks may reduce our working capital, impact our long-term business strategy and impact the value of our assets and our ability to meet certain covenants in our existing debt agreements.

We do not control our hotel operations and we are dependent on the managers of our hotels.

To maintain our status as a REIT, we are not permitted to operate any of our hotels. As a result, we have entered into management agreements with third-party managers to operate our hotel properties. For this reason, we are unable to directly implement strategic business decisions with respect to the daily operation and marketing of our hotels, such as decisions with respect to the setting of room rates, negotiation of corporate client contracts, food and beverage pricing and certain similar matters. Although we consult with our hotel operators with respect to strategic business plans, the hotel operators are under no obligation to implement any of our recommendations with respect to these matters. While we monitor the hotel managers’ performance, we have limited recourse under our management agreements if we believe that the hotel managers are not performing adequately. The cash flow from our hotels may be affected adversely if our managers fail to provide quality services and amenities or if they or their affiliates fail to maintain the hotels in an acceptable condition.

From time to time, we may have differences with the managers of our hotels over their performance and compliance with the terms of our management agreements. If we are unable to reach satisfactory results through discussions and negotiations, we may choose to litigate the dispute or submit the matter to third-party dispute resolution. Failure by our hotel managers to fully perform the duties agreed to in our management agreements or the failure of our managers to adequately manage the risks associated with hotel operations, including cyber-security risks, could affect adversely our results of operations.

In addition, our hotel managers or their affiliates manage, and in some cases own, have invested in, or provided credit support or operating guarantees to hotels that compete with our hotels, all of which may result in conflicts of interest. As a result, our hotel managers have in the past made, and may in the future make, decisions regarding competing hospitality facilities that are not or would not be in our best interest.

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Island Hospitality Group, Inc. ("Island") manages the majority of our hotels in our hospitality segment pursuant to management agreements. In addition, Aimbridge Hospitality (“Aimbridge”) manages all of the hotel properties in the THL Hotel Portfolio that we acquired through consensual foreclosure in July 2017. Although we have various rights as the property owner under our management agreements, we rely on Island’s and Aimbridge’s respective personnel, expertise, technical resources and information systems, proprietary information, good faith and judgment to manage our hotel operations efficiently and effectively. Any adverse developments in Island’s and Aimbridge’s respective business and affairs or financial condition could impair their ability to manage our properties efficiently and effectively and could have a materially adverse effect on us.

We are subject to risks associated with the employment of hotel personnel, particularly with hotels that employ unionized labor.

Our third-party managers are responsible for hiring and maintaining the labor force at each of our hotels. Although we do not directly employ or manage employees at our hotels, we still are subject to many of the costs and risks generally associated with the hotel labor force, particularly at those hotels with unionized labor. From time to time, hotel operations may be disrupted as a result of strikes, lockouts, public demonstrations or other negative actions and publicity. We also may incur increased legal costs and indirect labor costs as a result of contract disputes involving our third-party managers and their labor force or other events. The resolution of labor disputes or re-negotiated labor contracts could lead to increased labor costs, a significant component of our hotel operating costs, either by increases in wages or benefits or by changes in work rules that raise hotel operating costs. Additionally, hotels where our third-party managers have collective bargaining agreements with employees are more highly affected by labor force activities than others. Furthermore, labor agreements may limit the ability of our hotel managers to reduce the size of hotel workforces during an economic downturn because collective bargaining agreements are negotiated between the hotel managers and labor unions. Our ability, if any, to have any material impact on the outcome of these negotiations is restricted by and dependent on the individual management agreement covering a specific property and we may have little ability to control the outcome of these negotiations.

In addition, changes in labor laws may negatively impact us. For example, increases in minimum wage laws and the Department of Labor’s recent regulations effective as of January 1, 2020, which expand the scope of non-exempt employees under the Fair Labor Standards Act to increase the entitlement to overtime pay could significantly increase the cost of labor in the workforce, which would increase the operating costs of our hotel properties and may have a material adverse effect on us.

We are subject to risks associated with our ongoing need for renovations and capital improvements as well as financing these expenditures.

In order to remain competitive, our hotels have an ongoing need for renovations and other capital improvements, including replacements, from time to time, of furniture, fixtures and equipment. These capital improvements may give rise to the following risks:

•construction cost overruns and delays;

•a possible shortage of liquidity to fund capital improvements and the related possibility that financing for these capital improvements may not be available to us on affordable terms;

•the renovation investment failing to produce the returns on investment that we expect;

•disruptions in the operations of the hotel as well as in demand for the hotel while capital improvements are underway; and

•disputes with franchisors or hotel managers regarding compliance with relevant management or franchise agreements.

We may have insufficient liquidity to fund capital expenditures and, consequently, we may need to rely upon the availability of debt or equity capital to fund our investments and capital improvements. These sources of funds may not be available on reasonable terms and conditions or at all.

We have significant leverage on our hotel properties, which increases the risk of loss associated with our hotel investments, impacts our liquidity and restricts our ability to engage in certain activities.

As of December 31, 2020, we had $3.5 billion of borrowings outstanding on our hotel properties, including the THL Hotel Portfolio. Use of leverage increases our risk of loss, impacts our liquidity and restricts our ability to engage in certain activities, including our ability to implement certain transactions or dispose of certain assets. If we fail to comply with the covenants required by our borrowings or do not generate sufficient cash flow to service our borrowings, our liquidity may be materially and adversely affected. If we default on borrowings, we may be required to repay outstanding obligations,

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including penalties, prior to the stated maturity, be subject to cash flow sweeps or potentially have assets foreclosed upon. In addition, we may be unable to refinance borrowings when they become due on favorable terms, at similar interest rate levels, or at all, which could have a material adverse impact on our results of operations. Refer to “Risk Factors—Risks Related to Our Business Strategy—Pandemics or disease outbreaks, such as the current novel coronavirus (COVID-19) pandemic, have and the COVID-19 pandemic is expected to continue to, significantly disrupt, and may materially adversely impact, our business, financial condition and ability to execute on our business objectives—Risks Related to Our Hospitality Business” above for further discussion on the COVID-19 pandemic’s impact on the leverage on our hotel properties.

Risks of operating hotels under franchise licenses, which may be terminated or not renewed, may impact our ability to make distributions to stockholders.

The continuation of our franchise licenses is subject to specified operating standards and other terms and conditions. All of the franchisors of our hotels periodically inspect our hotels to confirm adherence to their operating standards. The failure to maintain such standards or to adhere to such other terms and conditions could result in the loss or cancellation of the applicable franchise license. It is possible that a franchisor could condition the continuation of a franchise license on the completion of capital improvements that we determine are too expensive or otherwise not economically feasible in light of general economic conditions, the operating results or prospects of the affected hotel. In that event, we may elect to allow the franchise license to lapse or be terminated.

There can be no assurance that a franchisor will renew a franchise license at each option period. If a franchisor terminates a franchise license, we may be unable to obtain a suitable replacement franchise, or to successfully operate the hotel independent of a franchise license. In addition, in certain cases we have guaranteed the payment obligations under our franchise licenses and a termination of such license could cause us to be liable under our guarantee for liquidated damages. Refer to “Risk Factors—Risks Related to Our Business Strategy—Pandemics or disease outbreaks, such as the current novel coronavirus (COVID-19) pandemic, have and the COVID-19 pandemic is expected to continue to, significantly disrupt, and may materially adversely impact, our business, financial condition and ability to execute on our business objectives—Risks Related to Our Hospitality Business” above for further discussion regarding our franchise fee guarantees.

The loss of a franchise license could have a material adverse effect upon the operations or the underlying value of the related hotel because of the loss of associated name recognition, marketing support and centralized reservation systems provided by the franchisor. Our loss of a franchise license for one or more of the hotels could have a material adverse effect on our revenues and our amounts available for distribution to shareholders.

Increasing interest rates could materially impact the operating results of our hotel properties.

All of our hotel properties are financed with floating-rate debt. If interest rates rise, the costs of our existing floating rate borrowings and any new borrowings that we incur would increase. These increased costs could reduce the profitability of our hotel properties or impair our ability to meet our debt obligations, which in turn may have a material adverse effect on our cash flow, results of operations and overall financial position. An increase in interest rates also could limit our ability to refinance existing debt upon maturity or cause us to pay higher rates upon refinancing, as well as decrease the amount that third parties are willing to pay for our hotels, thereby limiting our ability to promptly reposition our portfolio in response to changes in economic or other conditions.

We have obtained, and we may in the future obtain, one or more forms of interest rate protection, including swap agreements, interest rate cap contracts or similar agreements, that involve additional risks, including the risks that counterparties may fail to honor their obligations under these arrangements, that these arrangements may not be effective in reducing our exposure to interest rate changes, that the amount of income we earn from hedging transactions may be limited by federal tax provisions governing REITs, and that these arrangements may cause us to pay higher interest rates on our debt obligations than otherwise would be the case. Moreover, no amount of hedging activity can fully insulate us from the risks associated with changes in interest rates. Failure to hedge effectively against interest rate risk, if we choose to engage in such activities, could adversely affect our results of operations and financial condition.

There can be no assurance that the pending disposition of our hospitality business will be completed on the terms contemplated or at all or that we will be able to realize the anticipated benefits of such sale transaction.

In September 2020, we announced that we entered into a definitive agreement with a third party to sell our $2.8 billion hospitality business, composed of 197 hotel properties in aggregate, for gross aggregate selling price of $67.5 million, subject to certain adjustments as provided in the sale agreement, as amended. The sale is expected to close in the first half of 2021. There can be no assurance that this sale transaction will be completed on the terms contemplated, in accordance with the anticipated timing or at all. Consummation of the sale is subject to customary closing conditions, including but not limited to, the acquirer’s assumption of the outstanding $2.7 billion mortgage notes encumbering the

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hotel properties and third party approvals, including any applicable franchisor consent. There can be no assurance that these conditions to closing will be satisfied. Furthermore, even if we are able to consummate the sale of this business, there can be no assurance that we will realize the anticipated benefits to us of such transaction, including any amount of net proceeds from the transaction as a result of transaction costs or other transaction related expenses. Moreover, one of the Company's hospitality portfolios, which is in receivership, is not a part of the sale transaction. There can be no assurance as to when such hospitality portfolio will be foreclosed upon or sold by the receiver to a third party.

Risks Related to Our Legacy Investment Management Business

See “Risk Factors—Risks Related to Our Digital Business—Risks Related to Our Digital Investment Management Business” above for risk factors that are also applicable to our legacy investment management business.

Certain of our management agreements with investment vehicles that are publicly-registered companies with the SEC are subject to limitation or termination, and any such termination could have a material adverse effect on our business, results of operations and financial condition.

The agreements under which we provide management and other services to companies that raise capital through the public markets are renewable upon mutual consent of the parties for an unlimited number of successive one-year periods. In certain instances, these agreements may generally be terminated by such managed public company immediately for cause, or upon 60 days’ written notice, without cause or for good reason, and expire on an annual basis, unless otherwise renewed. Further, we anticipate that our managed retail public companies will pursue a liquidity transaction in the future and, if successful, certain liquidity transactions could result in termination or expiration of these agreements. With respect to our management agreement with CLNC, the initial term expires on January 31, 2021, which will automatically be renewed for successive one-year periods thereafter unless we or, in certain limited circumstances, CLNC, elect not to renew by providing 180 days prior written notice. There can be no assurance that these agreements will not expire or be terminated or not be renewed. Any such termination, expiration or non-renewal could have a material adverse effect on our business, results of operations, financial condition and prospects.

In addition to the management fees we receive from our managed companies, we are reimbursed by the publicly traded and retail companies we manage for costs and expenses we incur on their behalf, including certain indirect personnel and employment costs that we may allocate to such managed companies and disputes could arise in connection with those allocations.

We are paid substantial fees for the services we and our subsidiaries provide to our managed companies and we are also reimbursed by the publicly-traded and retail companies we manage for certain costs and expenses we incur and pay on their behalf. Such managed companies reimburse us, subject to certain limitations and exceptions, for both direct expenses as well as indirect costs, including our personnel and employment costs. The costs and expenses that we allocate to our publicly-traded and retail companies can be substantial and may involve subjective judgment and discretion. There are conflicts of interest that arise when we make allocation determinations. These conflicts of interest, as well as the loyalties of our executives and other real estate and finance professionals to other entities and investors, could result in action or inaction that is detrimental to our business, which could harm the implementation of our business strategy and our reputation. For the year ended December 31, 2020, we allocated $12.5 million in costs to CLNC and our retail companies, in the aggregate. These managed companies could dispute the amount of costs we allocate to them and the methodologies we use to determine those amounts. Any dispute or investigation regarding our allocation of costs and expenses could be distracting, expensive and harmful to our reputation as well as have other adverse effects on our company and future operating performance, including the potential that such managed companies could seek to terminate their relationship with us.

In addition, our managed companies that are publicly-traded grant, either directly or indirectly through us as manager, equity awards to certain of our employees in connection with the services that we provide to such companies as their manager. Such grants of equity awards are in the discretion and subject to the approval of the specific managed company's board of directors or compensation committee. As of the date of this report, CLNC is our only managed company that is publicly traded. In 2020, the publicly-traded companies we manage did not issue any equity awards directly or indirectly to our employees and, as a result, we issued more equity awards in our class A common stock to compensate and retain our employees. In addition, we may pursue a disposition of our management agreement with CLNC, a potential transaction with CLNC to internalize its management, a sale of the management agreement to a third party or any other transaction the effect of which would be to dispose of the management agreement. If any such disposition transaction were consummated, it would result in us no longer serving as CLNC's external manager. To the extent CLNC continues, or any future publicly-traded managed companies determines, not to grant equity awards to us or our employees, either in the amounts historically granted, recommended by us or at all, or we cease to manage CLNC (as

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a result of a disposition transaction or otherwise) or any other publicly-traded company, we may continue to determine to increase the equity awards issued by our Company in order to compensate and retain our employees, which could hinder our ability to effectuate our cost savings initiatives, increase dilution to our stockholders and adversely impact our financial results.

Our ownership of approximately 36% of CLNC, on a fully diluted basis, subjects us to various risks, any of which could have a material adverse effect on our business and results of operations.

In connection with our contribution of the CLNY Contributed Portfolio (as described in Note 6 to the consolidated financial statements in Item 15 of this Annual Report), as of the date of this report, we own approximately 44.9 million shares of CLNC’s class A common stock, which is listed on the NYSE, and approximately 3.1 million common membership units in CLNC's operating company ("CLNC OP Units"), which represent, in the aggregate, approximately 36% of CLNC’s total outstanding shares on a fully diluted basis. The CLNC OP Units are redeemable for cash or class A common stock of CLNC, in CLNC’s sole discretion. During 2020, there was substantial volatility in CLNC’s trading price, with its class A common stock trading between $14.01 and $2.46 per share. With increasing uncertainty over the extent and duration of the COVID-19 pandemic, and the timeline for a recovery in the U.S economy, the Company recognized an $275 million other-than-temporary impairment on its CLNC investment in the second quarter 2020. The foregoing impairment was in addition to the $228 million other-than-temporary impairment on its CLNC investment recognized in the second quarter 2019. At December 31, 2020, the carrying value of our CLNC investment was $385 million, or $8.04 per share, while the trading price of CLNC’s stock was $7.50 per share. If CLNC's class A common stock continues to trade below our current carrying value for a prolonged period of time, an other-than-temporary impairment may be recognized in the future.

Although we are the external manager to CLNC and have three representatives on CLNC’s board of directors who are our current and former members of our senior management team, our role as manager is under the supervision and direction of CLNC’s board of directors, which has a total of seven members, a majority of whom are independent. Therefore, the value of our investment is subject to the strategies and management decisions of the CLNC board of directors as a whole, as well as the trading price of CLNC’s class A common stock on the NYSE.

In addition, in connection with our digital transformation, we may pursue a disposition of our management agreement with CLNC, which may include without limitation a potential transaction with CLNC to internalize its management, a sale of the management agreement to a third party or any other transaction the effect of which would be to dispose of the management agreement. If any such disposition transaction were consummated, it would result in us no longer serving as CLNC's external manager. If we are no longer CLNC's manager or we no longer have any representatives on CLNC's board of directors, whether as a result of a disposition transaction or otherwise, the value of our investment would be solely dependent on the strategies and management decisions of the CLNC board of directors and, if applicable, a third party manager.

Moreover, CLNC owns and expects to continue to originate, acquire, finance and manage a diversified portfolio of commercial real estate debt and net lease real estate investments predominantly in the United States. As a result, our investment in CLNC exposes us to the same risks that we are subject to as a result of our other equity and debt segment, as further described in “Risk Factors—Risks Related to Our Other Equity and Debt Business.” If any of the foregoing risks were to occur, our investment in CLNC could decline in value and our results of operations could be materially and adversely affected.

Risks Related to Our Other Equity and Debt Business

Our commercial real estate equity, debt and mortgage loans underlying our commercial real estate securities investments are subject to the risks typically associated with commercial real estate ("CRE").

Our CRE equity, debt and securities investments are subject to the risks typically associated with real estate, including:

•local, state, national or international economic conditions;

•real estate conditions, such as an oversupply of or a reduction in demand for real estate space in an area;

•lack of liquidity inherent in the nature of the asset;

•tenant/operator mix and the success of the tenant/operator business;

•the ability and willingness of tenants/operators/managers to maintain the financial strength and liquidity to satisfy their obligations to us and to third parties;

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•reliance on tenants/operators/managers to operate their business in a sufficient manner and in compliance with their contractual arrangements with us;

•ability and cost to replace a tenant/operator/manager upon default;

•property management decisions;

•property operating costs, including insurance premiums, real estate taxes and maintenance costs;

•the perceptions of the quality, convenience, attractiveness and safety of the properties;

•branding, marketing and operational strategies;

•competition from comparable properties;

•the occupancy rate of, and the rental rates charged at, the properties;

•the ability to collect on a timely basis all rent;

•the effects of any bankruptcies or insolvencies;

•the expense of leasing, renovation or construction, including escalations in such expenses;

•changes in interest rates and in the availability, cost and terms of mortgage financing;

•unknown liens being placed on the properties;

•bad acts of third parties;

•the ability to refinance mortgage notes payable related to the real estate on favorable terms, if at all;

•changes in governmental rules, regulations and fiscal policies;

•tax implications;

•changes in laws, including environmental laws or laws that increase operating expenses or limit rents that may be charged;

•the impact of present or future environmental legislation and compliance with environmental laws, including costs of remediation and liabilities associated with environmental conditions affecting properties;

•cost of compliance with the Americans with Disabilities Act of 1990;

•adverse changes in governmental rules and fiscal policies;

•social unrest and civil disturbances;

•acts of nature, including earthquakes, hurricanes and other natural disasters;

•terrorism;

•the potential for uninsured or underinsured property losses;

•adverse changes in state and local laws, including zoning laws; and

•other factors which are beyond our control.

The value of each property is affected significantly by its ability to generate cash flow and net income, which in turn depends on the amount of rental or other income that can be generated net of expenses required to be incurred with respect to the property. Many expenses associated with properties (such as operating expenses and capital expenses) cannot be reduced when there is a reduction in income from the properties. These factors may have a material adverse effect on the value and the return that we can realize from our assets, as well as ability of our borrowers to pay their loans and the ability of the borrowers on the underlying loans securing our securities to pay their loans.

Our existing mezzanine loan assets and those that we may originate or acquire in the future are subject to greater risks of loss than senior loans secured by income-producing properties.

We currently own interests in mezzanine loans and may, subject to maintaining our qualification as a REIT, originate or acquire additional mezzanine loans (or interests in mezzanine loans). Mezzanine loans take the form of subordinated loans secured by junior participations in mortgages or second mortgages on the underlying property, or loans secured by a pledge of the ownership interests of either the entity owning the property or a pledge of the ownership interests of the entity that owns the interest in the entity owning the property. These types of assets involve a higher degree of risk than

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long-term senior mortgage lending secured by income-producing real property, because the loan may be foreclosed on by the senior lender. In addition, mezzanine loans may have higher loan-to-value ratios than conventional mortgage loans, resulting in less equity in the property and increasing the risk of loss of principal. If a borrower defaults on our mezzanine loan or debt senior to our loan, or in the event of a borrower bankruptcy, our mezzanine loan will be satisfied only after the senior debt is paid in full. Where debt senior to our loan exists, the presence of intercreditor arrangements between the holder of the senior mortgage loan and us, as the mezzanine lender, may limit our ability to amend our loan documents, assign our loans, accept prepayments, exercise our remedies and control decisions made in bankruptcy proceedings relating to borrowers. As a result, we may not recover some or all of our investment, which could result in losses. In addition, even if we are able to foreclose on the underlying collateral following a default on a mezzanine loan, we would replace the defaulting borrower and, to the extent income generated on the underlying property is insufficient to meet outstanding debt obligations on the property, we may need to commit substantial additional capital to stabilize the property and prevent additional defaults to lenders with remaining liens on the property. Significant losses related to our current or future mezzanine loans could have a material adverse effect on our results of operations and our ability to make distributions to our stockholders.

Regulatory Risks

Extensive regulation in the United States and abroad affects our activities, increases the cost of doing business and creates the potential for significant liabilities and that could adversely affect our business and results of operations.

Our business is subject to extensive regulation, including periodic examinations by governmental agencies and self-regulatory organizations in the jurisdictions in which we operate around the world. Many of these regulators, including U.S. and foreign government agencies and self-regulatory organizations and state securities commissions in the United States, are empowered to grant, and in specific circumstances to cancel, permissions to carry on particular activities, and to conduct investigations and administrative proceedings that can result in fines, suspensions of personnel or other sanctions, including censure, the issuance of cease-and-desist orders or the suspension or expulsion of applicable licenses and memberships. For example, in recent years the SEC and several states have initiated investigations alleging that certain private equity firms and hedge funds, or agents acting on their behalf, have paid money to current or former government officials or their associates in exchange for improperly soliciting contracts with the state pension funds (i.e., “ pay to play” practices). Such “pay to play” practices are subject to extensive federal and state regulation, and any failure on our part to comply with rules surrounding “pay to play” practices could expose us to significant penalties and reputational damage. Even if an investigation or proceeding does not result in a sanction or the sanction imposed against us or our personnel by a regulator were small in monetary amount, the costs incurred in responding to such matters could be material and the adverse publicity relating to the investigation, proceeding or imposition of these sanctions could harm our reputation and cause us to lose existing investors or fail to gain new investors or discourage others from doing business with us.

In addition, we regularly rely on exemptions from various requirements of the Securities Act, the Exchange Act, the 1940 Act, the Commodity Exchange Act and ERISA in conducting our investment activities in the United States. Similarly, in conducting our investment activities outside the United States, we rely on available exemptions from the regulatory regimes of various foreign jurisdictions. These exemptions from regulation within the United States and abroad are sometimes highly complex and may, in certain circumstances, depend on compliance by third parties whom we do not control. If for any reason these exemptions were to become unavailable to us, we could become subject to regulatory action or third party claims and our business could be materially and adversely affected. Moreover, the requirements imposed by our regulators are designed primarily to ensure the integrity of the financial markets and to protect investors in our funds and are not designed to protect our stockholders. Consequently, these regulations often serve to limit our activities and impose burdensome compliance requirements.

It is difficult to determine the full extent of the impact on us of any new laws, regulations or initiatives that may be proposed or whether any of the proposals will become law. Any changes in the regulatory framework applicable to our business, including the changes as a result of, among others, the Dodd-Frank Wall Street Reform and Consumer Protection Act, may impose additional costs on us, require the attention of our senior management or result in limitations on the manner in which we conduct our business. In 2018, several changes were made to the Dodd-Frank Act, including the repeal of certain provisions that eased restrictions on small and medium-sized banks of the Dodd-Frank Act. It is expected that the Biden administration will reverse a number of U.S. President Trump’s policies, includes those that relate to deregulation, and will increase the number of financial regulators as current vacancies in the bureaucracy are prioritized and filled under the new administration. Furthermore, we may become subject to additional regulatory and compliance burdens as we expand our product offerings and investment platform, including raising additional funds. Moreover, as calls for additional regulation have increased as a result of heightened regulatory focus in the financial industry, there may

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be a related increase in regulatory investigations of the trading and other investment activities of alternative asset management funds, including our managed companies. Compliance with any new laws or regulations could make compliance more difficult and expensive, affect the manner in which we conduct our business and adversely affect our profitability.

Failure to maintain our exemption from registration under the 1940 Act could require us to register as an investment company or substantially change the way we conduct our business, either of which may have an adverse effect on us and the market price for shares of our class A common stock.

We intend to conduct our operations so that we and our subsidiaries are not required to register as investment companies under the 1940 Act. Compliance with the 40% asset test under the 1940 Act and maintenance of applicable exemptions require that we subject our business to certain limitations on investment and activities. Continuing qualification for exemption from registration under the 1940 Act will limit our ability to make certain investments or change the relevant mix of our investments.

If we fail to maintain our exemption from registration as an investment company under the 1940 Act, either because of changes in SEC guidance or otherwise, we could be required to, among other things: (i) substantially change the manner in which we conduct our operations to avoid being required to register as an investment company under the 1940 Act; or (ii) register as an investment company. Either of (i) or (ii) could have an adverse effect on us and the market price for shares of our class A common stock. If we are required to register as an investment company under the 1940 Act, we would become subject to substantial regulation with respect to our capital structure (including our ability to use leverage), management, operations, transactions with affiliated persons (as defined in the 1940 Act), portfolio composition, including restrictions with respect to diversification and industry concentration and other matters.

Regulation of a subsidiary of our company under the Investment Advisers Act subjects us to the anti-fraud provisions of the Investment Advisers Act and to fiduciary duties derived from these provisions.

We have subsidiaries that are registered with the SEC as investment advisers under the Investment Advisers Act. As a result, we are subject to the anti-fraud provisions of the Investment Advisers Act and to fiduciary duties derived from these provisions that apply to our relationships with our managed companies. These provisions and duties impose restrictions and obligations on us with respect to our dealings with our managed companies' investors and our investments, including, for example, restrictions on agency, cross and principal transactions. We or our registered investment adviser subsidiaries will be subject to periodic SEC examinations and other requirements under the Investment Advisers Act and related regulations primarily intended to benefit advisory clients. These additional requirements relate to, among other things, maintaining an effective and comprehensive compliance program, recordkeeping and reporting requirements and disclosure requirements. The Investment Advisers Act generally grants the SEC broad administrative powers, including the power to limit or restrict an investment adviser from conducting advisory activities in the event it fails to comply with federal securities laws. Additional sanctions that may be imposed for failure to comply with applicable requirements under the Investment Advisers Act include the prohibition of individuals from associating with an investment adviser, the revocation of registrations and other censures and fines.

Regulation regarding climate change may adversely affect our financial condition and results of operations.

Changes in federal and state legislation and regulations on climate change could result in utility expenses and/or capital expenditures to improve the energy efficiency of our existing properties or other related aspects of our properties in order to comply with such regulations or otherwise adapt to climate change. These regulations may require unplanned capital improvements, and increased engagement to manage occupant energy use, which is a large driver of building performance. If our properties cannot meet performance standards, we could be exposed to fines for non-compliance, as well as a decrease in demand and a decline in value. As a result, our financial condition and results of operations could be adversely affected.

Risks Related to Taxation

Our qualification as a REIT involves complying with highly technical and complex provisions of the Code.

We elected to be taxed as a REIT under the U.S. federal income tax laws commencing with our taxable year ended December 31, 2017. Our qualification as a REIT involves the application of highly technical and complex provisions of the Code for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our REIT qualification. New legislation, court decisions or administrative guidance, in each case possibly with retroactive effect, may make it more difficult or impossible for us to qualify as a REIT.

Our qualification as a REIT depends on our ongoing satisfaction of certain gross asset, gross income, organizational, distribution, stockholder ownership and other requirements:

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•Our compliance depends upon the characterization of our assets and income for REIT purposes, as well as the relative values of our assets, some of which are not susceptible to a precise determination and for which we typically do not obtain independent appraisals. Moreover, we invest in certain assets with respect to which the rules applicable to REITs may be particularly difficult to interpret or to apply, including certain of our target digital infrastructure and real estate assets. If the IRS challenged our treatment investments for purposes of the REIT asset and income tests, and if such a challenge were sustained, we could fail to qualify as a REIT.

•The fact that we own direct or indirect interests in several REITs, each a Subsidiary REIT, further complicates the application of the REIT requirements for us. Each Subsidiary REIT is subject to the various REIT qualification requirements that are applicable to us and certain other requirements. If a Subsidiary REIT were to fail to qualify as a REIT, then (i) that Subsidiary REIT would become subject to regular U.S. federal corporate income tax, (ii) our interest in such Subsidiary REIT would cease to be a qualifying asset for purposes of the REIT asset tests, and (iii) it is possible that we would fail certain of the REIT asset tests, in which event we also would fail to qualify as a REIT unless we could avail ourselves of relief provisions.

If we were to fail to qualify as a REIT in any taxable year, we would be subject to U.S. federal corporate income tax on our taxable income at the regular corporate rate, and dividends paid to our stockholders would not be deductible by us in computing our taxable income. Any resulting corporate tax liability could be substantial and would reduce the amount of cash available for distribution to our stockholders, which in turn could have an adverse impact on the value of our class A Common Stock. In addition, we would no longer be required to make distributions to stockholders. Unless we were entitled to relief under certain Code provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year in which we failed to qualify as a REIT.

Complying with REIT requirements may force us to forgo and/or liquidate otherwise attractive investment opportunities.

To qualify as a REIT, we must ensure that we meet the REIT gross income tests annually and that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified REIT real estate assets. Compliance with these limitations, particularly given the nature of some of our digital and other investments (including international investments and certain hedging transactions), may hinder our ability to acquire, optimally finance, or maintain ownership of otherwise attractive investments. To maintain or REIT qualification we could sell be required to sell assets more quickly and on less favorable terms than in a sale not required for REIT qualification.

Our ownership of assets and conduct of operations through our TRSs is limited and involves certain risks for us.

Consistent with the REIT qualification requirements, we acquire and own significant assets through our TRSs, including our investment management business. Our TRSs generally will be subject to U.S. federal income tax, and/or applicable foreign, state and local tax. Only their after-tax net income is available for distribution to us and our stockholders. The REIT rules limit our use of TRSs, including as follows:

•No more than 20% of the value of our gross assets may consist of stock or securities of one or more TRSs and no more than 25% of our gross income can consist of dividend, non-mortgage interest income, or gain from our TRSs securities.

•A 100% excise tax applies to certain amounts related to transactions involving a TRS and its parent REIT that are not priced on an arm’s-length basis.

•Our leases of hotel and healthcare property leases with our TRSs must be respected as true leases for U.S. federal income tax purposes and must not be treated as service contracts, joint ventures or some other type of arrangement in order for us to qualify as a REIT and our TRSs must not directly or indirectly operate hotels or healthcare property.

We are mindful of these limitations and analyze and structure the income and operations of our TRSs to mitigate these costs and risks to us to the extent practicable, but we may not always be successful in all cases.

The ability of our board of directors to revoke our REIT election without stockholder approval may cause adverse consequences to our stockholders.

Our Charter provides that the board of directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if the board determines that it is no longer in our best interest to continue to qualify as a REIT. If we cease to qualify as a REIT, we would become subject to U.S. federal income tax on our net taxable income and we generally would no longer be required to distribute any of our net taxable income to our stockholders, which could adversely affect the attractiveness and value of our Common Stock.

There is a risk of changes in the tax law applicable to REITs.

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The IRS, the United States Treasury Department and Congress frequently review U.S. federal income tax legislation, regulations and other guidance. We cannot predict whether, when or to what extent new U.S. federal tax laws, regulations, interpretations or rulings will be adopted. Any legislative action may prospectively or retroactively modify our tax treatment and, therefore, may adversely affect our taxation or our stockholders. We urge you to consult with your tax advisor with respect to the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our stock. Although REITs generally receive certain tax advantages compared to entities taxed as non-REIT “C” corporations, it is possible that future legislation would result in a REIT having fewer tax advantages, and it could become more advantageous for us to elect to be treated for U.S. federal income tax purposes as a non-REIT “C” corporation.

The REIT distribution requirements apply only if we have taxable income and, if we are required to make distributions, we will have less cash available to execute our business plan.

We generally must distribute annually at least 90% of our “REIT taxable income” (subject to certain adjustments and excluding any net capital gain) in order to qualify as a REIT, and any REIT taxable income that we do not distribute will be subject to U.S. corporate income tax at regular rates. If we do not have REIT taxable income or to the extent we utilize loss carryovers from prior years to reduce REIT taxable income, we will not be required to make distributions to shareholders.

We may generate taxable income greater than our income for financial reporting purposes prepared in accordance with GAAP, or differences in timing between the recognition of taxable income and the actual receipt of cash may occur. As a result of both the requirement to distribute 90% of our REIT taxable income each year (and to pay tax on any REIT taxable income that we do not distribute) and the fact that our taxable income could exceed our cash income, we may find it difficult to meet the REIT distribution requirements in certain circumstances while also having adequate cash resources to execute our business plan. In particular, where we experience differences in timing between the recognition of taxable income and the actual receipt of cash, the requirement to distribute a substantial portion of our taxable income could cause us to: (i) sell assets in adverse market conditions, (ii) borrow on unfavorable terms, or (iii) distribute amounts that would otherwise be invested in future acquisitions, capital expenditures or repayment of debt in order to comply with REIT requirements. These alternatives could increase our costs, reduce our equity, and/or result in stockholders being taxed on distributions of shares of stock without receiving cash sufficient to pay the resulting taxes. Thus, compliance with the REIT distribution requirements may hinder our ability to grow, which could adversely affect the value of our Common Stock.

Dividends payable by REITs do not qualify for the preferential tax rates available for some dividends.

The maximum U.S. federal income tax rate applicable to "qualified dividend income" paid by non-REIT "C" corporations to U.S. stockholders that are individuals, trusts and estates generally is 20%, whereas ordinary income dividends payable by REITs to those U.S. stockholders generally are not eligible for the 20% rate. Although the reduced rates applicable to dividend income from non-REIT "C" corporations do not adversely affect the taxation of REITs or dividends payable by REITs, it could cause investors who are non-corporate taxpayers to perceive investments in REITs to be relatively less attractive than investments in the shares of non-REIT "C" corporations that pay dividends, which could adversely affect the value of our Common Stock.

We might elect to distribute our common stock in a taxable distribution in order to satisfy the REIT distribution requirements, in which case stockholders may sell shares of our common stock to pay tax on such distributions, placing downward pressure on the market price of our common stock.

To make required REIT distributions and preserve cash, we might elect to make taxable distributions that are payable partly in cash and partly in shares of our common stock. If we made a taxable dividend payable in cash and shares of our common stock, taxable stockholders receiving such distributions will be taxed on the full amount of the distribution that otherwise would be a dividend for tax purposes, even though part is paid in stock. If we made a taxable dividend payable in cash and our common stock and a significant number of stockholders determine to sell shares of our common stock in order to pay taxes owed on dividends, it may put downward pressure on the trading price of our common stock.

Even if we continue to qualify as a REIT, we may face other tax liabilities that reduce our cash available for distribution to stockholders.

We are subject to U.S. federal and state income tax (and any applicable non-U.S. taxes) on the net income earned by our TRSs. Our TRSs generally are expected to have material assets and income. In addition, we have substantial operations and assets outside of the U.S. that are subject to tax in those countries, which are not likely to generate an offsetting credit for taxes in the U.S. Even if we qualify for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes on our income and assets, including taxes on any undistributed income, tax on income from assets or activities that we undertake after foreclosing on our tenants or borrowers, and state or local income, property and transfer taxes, such as mortgage recording taxes. In addition, if we have net income from “prohibited transactions,” that

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income will be subject to a 100% tax. In general, “prohibited transactions” are sales or other dispositions of property, other than foreclosure property held primarily for sale to customers in the ordinary course of business. Finally, we could, in certain circumstances, be required to pay an excise or penalty tax (which could be significant in amount) in order to utilize one or more relief provisions under the Code to maintain our qualification as a REIT. Any of these taxes would decrease cash available for distribution to our stockholders.

Our ability to use our tax benefits could be substantially limited if we experience an “ownership change”

Our net operating loss (“NOL”) carryforwards and certain recognized built-in losses may be limited by Sections 382 and 383 of the Code if we experience an “ownership change.” In general, an “ownership change” occurs if 5% shareholders increase their collective ownership of the aggregate amount of the outstanding shares of our company by more than 50 percentage points looking back over the relevant testing period. If an ownership change occurs, our ability to use our NOLs and certain recognized built-in losses to reduce our REIT distribution requirements or taxable income in a future year would be limited to a Section 382 limitation equal to the fair market value of our stock immediately prior to the ownership change multiplied by the long-term tax-exempt interest rate in effect for the month of the ownership change. The determination of whether an ownership change has occurred or will occur is complicated and depends on changes in percentage stock ownership among shareholders. Therefore, no assurance can be provided as to whether an ownership change has occurred or will occur in the future

We will be subject to corporate income tax on the sale of assets acquired from or previously held by a non-REIT “C” corporation within five years of our acquisition of those assets or our becoming a REIT.

If a REIT previously was a non-REIT “C” corporation, or it acquires any asset from a non-REIT “C” corporation, or a corporation that generally is subject to full corporate-level tax, in a merger or other transaction in which it acquires a basis in the asset that is determined by reference either to the non-REIT “C” corporation’s basis in the asset or to another asset, the REIT generally will pay tax at the highest regular corporate rate applicable if it recognizes gain on the sale or disposition of the asset during the five-year period after it becomes a REIT or it acquires the asset. Built-in gain on assets held by NSAM as of January 1, 2017, remain subject to this REIT-level tax through the end of 2021.

We may incur adverse tax consequences if Colony or NRF were to have failed to qualify as a REIT for U.S. federal income tax purposes prior to the Mergers.

In connection with the closing of the Mergers, we received an opinion of counsel to each of Colony and NRF to the effect that it qualified as a REIT for U.S. federal income tax purposes under the Code through the time of the Mergers. Neither Colony nor NRF, however, requested a ruling from the Internal Revenue Service (the “IRS”) that it qualified as a REIT. If, notwithstanding these opinions, Colony’s or NRF’s REIT status for periods prior to the Mergers were successfully challenged, we would face serious adverse tax consequences (ranging from corporate tax liability to loss of REIT status for past and future years) that would substantially reduce our Core FFO, including cash available to pay dividends to our stockholders.

We could be subject to increased taxes if the tax authorities in various international jurisdictions were to modify tax rules and regulations on which we have relied in structuring our international investments.

We currently receive favorable tax treatment in various international jurisdictions through tax rules, regulations, tax authority rulings, and international tax treaties. Should changes occur to these rules, regulations, rulings or treaties, we may no longer receive such benefits, and consequently, the amount of taxes we pay with respect to our international investments may increase.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Our corporate headquarters are located in Boca Raton, Florida, where we lease approximately 17,000 square feet of office space. We also lease office space for the remaining 13 corporate locations across the U.S., Europe, Asia and Latin America. We believe that our offices are suitable and adequate for conducting our business.

Information regarding our investment properties is included in Schedule III. Real Estate and Accumulated Depreciation in Item 15. "Exhibits and Financial Statement Schedules" and in Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations—Segments" of this Annual Report.

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Item 3. Legal Proceedings.

The information set forth under "Litigat ion" in Note 22 to the consolidated financial statements in Item 15 of this Annual Report is incorporated herein by reference.

Item 4. Mine Safety Disclosures.

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our class A common stock is traded on the NYSE under the symbol “CLNY.”

On February 22, 2021, there were 2,541 holders of our class A common stock and one holder of our class B common stock (which, in each case, does not reflect the beneficial ownership of shares held in nominee name).

Distributions

Holders of our common stock are entitled to receive distributions if and when the board of directors authorizes and declares distributions. The board of directors has not established any minimum distribution level. In order to maintain our qualification as a REIT, we intend to pay dividends to our stockholders that, on an annual basis, will represent at least 90% of our taxable income (which may not necessarily equal net income as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and excluding any net capital gains. No distributions can be paid on our class A and class B common stock unless we have paid all cumulative dividends on our Series G, Series H, Series I and Series J preferred stock. Under the current terms of our amended credit facility, we are restricted from paying common dividends other than to maintain our status as a REIT or to reduce income tax payments. We will continue to monitor our financial performance and liquidity position, and as economic conditions improve, we will reevaluate our dividend policy in consultation with our revolver lending group. We cannot assure our stockholders that we will make any future distributions.

Dividends paid to stockholders, for income tax purposes, represent distributions of ordinary income, capital gains, return of capital or a combination thereof. The following table presents the income tax treatment of dividends per share of common and preferred stock.


	Common Stock (1)		Preferred Stock (2)(3)
			Series B		Series D		Series E		Series G		Series H		Series I		Series J
2020


Return of capital (4)	$	0.22	NA		NA		NA		$	1.87	$	1.78	$	1.79	$	1.78

2019
Ordinary income	$	0.14	$	0.84	NA		$	0.89	$	0.76	$	0.72	$	0.73	$	0.72
Capital gains	0.20		1.22		NA		1.30		1.11		1.06		1.06		1.06
Return of capital (4)	0.10		—		NA		—		—		—		—		—
Total	$	0.44	$	2.06	NA		$	2.19	$	1.87	$	1.78	$	1.79	$	1.78
2018
Ordinary income	$	0.05	$	0.97	$	0.63	$	1.03	$	0.66	$	0.63	$	0.63	$	0.63
Capital gains	0.06		1.09		0.71		1.16		0.74		0.71		0.71		0.71
Return of capital (4)	0.22		—		—		—		—		—		—		—
Total	$	0.33	$	2.06	$	1.34	$	2.19	$	1.40	$	1.34	$	1.34	$	1.34

__________

(1) Common stock dividends declared in November 2018 and 2019 and paid in January 2019 and 2020, respectively, were considered distributions in the year paid for federal income tax purposes. In 2020, the Company suspended dividends on its class A common stock beginning with the second quarter of 2020.

(2) During the year ended December 31, 2018, we redeemed all of Series D preferred stock. In December 2019, we redeemed the remaining Series B and all of Series E preferred stock, with the redemptions settled in January 2020.

(3) Distributions on the Company's Series G, H, I and J preferred stock that were declared in November 2017, 2018 and 2019 and paid in January 2018, 2019 and 2020, respectively, were considered distributions in the year paid for federal income tax purposes.

(4) Represents dividends paid in excess of our current and accumulated earnings and profit ("E&P"), which is a tax-based measure calculated by making adjustments to taxable income for items that are treated differently for E&P purposes. A return of capital reduces the basis of a stockholder's investment in our common stock in 2018 and 2019 and in both our common stock and preferred stock in 2020 to the extent of such basis. Distributions of return of capital dividends in excess of a shareholder's basis are treated as capital gains.

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Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

Redemption of Membership Units in OP ("OP Units")—Holders of OP Units have the right to require the OP to

redeem all or a portion of their OP Units for cash or, at our option, shares of our class A common stock on a one-for-one basis. In the fourth quarter of 2020, in satisfaction of redemption request by an employee OP Unit holder, we issued 2,000,000 shares of our class A common stock to a charitable organization. Such shares of class A common stock were issued in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended.

Stock Performance Graph

The following graph compares the cumulative total return on our class A common stock with the cumulative total returns on the Standard & Poor’s 500 Composite Stock Price Index (the “S&P 500 Index”) and the MSCI US REIT Index, comprising equity REITs ("RMZ Index") from December 31, 2015 to December 31, 2020. Our stock prices prior to the Merger represent our share prices pre-Merger adjusted to give effect to the exchange ratio of one share of our common stock for 1.4663 shares of the common stock of the Company post-Merger. The graph assumes an investment of $100 in our common stock and each of the indices on December 31, 2015 and the reinvestment of all dividends. The cumulative total return on our class A common stock as presented is not necessarily indicative of future performance.

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Item 6. Selected Financial Data.

Selected Quarterly Financial Information (Unaudited)

Quarterly periods prior to the third quarter of 2020 reflect the reclassification of our hotel business from continuing to discontinued operations.


For the three months ended	2020								2019
(In thousands, except per share data)	Dec-31		Sep-30		Jun-30		Mar-31		Dec-31		Sep-30		Jun-30		Mar-31
Statements of Operations Data:
Total revenues	$	338,844	$	316,677	$	286,733	$	294,340	$	299,113	$	359,000	$	269,507	$	279,203
Loss from continuing operations	(287,182)		(184,216)		(1,890,720)		(102,119)		(426,666)		(591,496)		(479,724)		(20,466)
Income (loss) from discontinued operations	(18,948)		(177,014)		(828,273)		(301,938)		1,358,394		25,654		(4,922)		(9,689)
Net income (loss)	(306,130)		(361,230)		(2,718,993)		(404,057)		931,728		(565,842)		(484,646)		(30,155)
Net loss attributable to Colony Capital, Inc.	(122,059)		(187,267)		(2,024,274)		(342,159)		(4,263)		(527,816)		(441,752)		(74,976)
Net loss attributable to common stockholders	(140,575)		(205,784)		(2,042,790)		(361,633)		(26,251)		(554,953)		(468,890)		(102,113)
Per Share Data:
Loss from continuing operations per share:
Basic	$	(0.24)	$	(0.22)	$	(2.90)	$	(0.25)	$	(0.86)	$	(1.16)	$	(0.96)	$	(0.18)
Diluted	(0.24)		(0.22)		(2.90)		(0.25)		(0.86)		(1.16)		(0.96)		(0.18)
Income (loss) from discontinued operations per share:
Basic	(0.06)		(0.22)		(1.43)		(0.51)		0.80		0.00		(0.02)		(0.03)
Diluted	(0.06)		(0.22)		(1.43)		(0.51)		0.80		0.00		(0.02)		(0.03)
Net loss attributable to common stockholders per share:
Basic	(0.30)		(0.44)		(4.33)		(0.76)		(0.06)		(1.16)		(0.98)		(0.21)
Diluted	(0.30)		(0.44)		(4.33)		(0.76)		(0.06)		(1.16)		(0.98)		(0.21)
Dividends per common share (1)	—		—		—		0.11		0.11		0.11		0.11		0.11

__________

(1) The Company suspended dividends on its class A common stock beginning with the second quarter of 2020.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included in "Item 15. Exhibits and Financial Statement Schedules" of this Annual Report.

Significant Developments

During 2020 and through the date of this filing, significant developments affecting our business and results of operations included the following, in addition to the effects of COVID-19 as discussed throughout this Annual Report.

In summary, we have stabilized our capital structure and strengthened our liquidity profile, accelerated our digital transformation through executed and planned divestiture of non-digital assets, and redeployed capital into growing our digital balance sheet, combined with successful fund raising of $7.4 billion of third party capital in our digital investment management business.

Liquidity

We addressed near-term corporate maturities and enhanced our long-term capital structure and liquidity profile as follows:

•We amended our Credit Agreement in June 2020 and exercised our first 6-month extension option in December 2020. As a result, our borrowing capacity under the facility was reduced to $450 million (which will be further reduced to $400 million on March 31, 2021), and we were provided with greater financial covenant flexibility and more borrowing base credit for digital investments. The facility is scheduled to expire in July 2021, with one remaining 6-month extension option. At this time, we expect to either exercise our second extension option or otherwise replace the existing credit facility.

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•In July 2020, we issued $300 million of exchangeable senior notes maturing in July 2025, bearing interest at 5.75% per annum, and have since repaid $402.5 million of convertible notes due in January 2021. As a result, we have no corporate debt maturities (other than our corporate credit facility) until 2023.

Path to Digital

Strategic Partnership in Our Digital Investment Management Business

•In July 2020, we formed a strategic partnership with affiliates of Wafra, Inc. (collectively, "Wafra") in which Wafra made an investment representing an approximate 31.5% interest in substantially all of our digital investment management business (as defined for the purpose of this transaction, the “Digital IM Business”). Wafra paid consideration of $254 million for its investment in the Digital IM Business and for warrants issued by the Company to Wafra (assuming the consideration excludes the warrants, this implies an approximately $805 million valuation of the Digital IM Business). Wafra has agreed to assume certain of the Company's existing commitments made to DCP I and to make commitments to DCP II and to the Company’s initial digital credit fund, in an aggregate amount of at least $130 million. Wafra has also agreed to make commitments to the Company's future digital funds and investment vehicles on a pro rata basis with the Company based on Wafra's percentage interest in the Digital IM Business, subject to certain caps. Wafra's investment provides us with permanent capital to pursue strategic digital infrastructure investments and grow the Digital IM Business.

Investment in Hyperscale Data Centers

•In July 2020 and following an additional investment in October 2020, the Company, alongside fee bearing third party capital, invested $1.36 billion for approximately 90% equity interest in entities that hold Vantage Data Centers' ("Vantage") portfolio of 12 stabilized hyperscale data centers in North America and $2.0 billion of secured indebtedness (the “Vantage SDC”). Our balance sheet investment is $197 million, representing a 13% equity interest. Vantage SDC is our second significant balance sheet investment in a digital operating business and achieves our transformation goals on two fronts, the rotation of our balance sheet to digital assets and growing our digital investment management business.

DataBank's Strategic Investment

•In December 2020, our DataBank subsidiary closed on its acquisition of zColo, the colocation assets of Zayo Group Holdings, Inc. ("Zayo"), consisting of 39 data centers in the U.S and U.K., for approximately $1.2 billion through a combination of debt and equity financing, including $0.5 billion of third party co-invest capital raised by us and a $188 million investment from our balance sheet (decreased to approximately $145 million upon raising of additional third party capital in February 2021 which maintains our 20% interest in DataBank). Acquisition of zColo's remaining five data centers in France for $33.0 million closed in February 2021. The acquisition of zColo accelerates DataBank's edge and hybrid cloud strategy, complements its existing relationships and significantly expands its geographic footprint to a national scale in strategically important data center markets.

Digital Colony Partners II or DCP II

•In February 2021, we held a closing of DCP II, our second digital opportunistic fund, with total callable commitments of $4.2 billion, inclusive of $120 million of our commitments as general partner and limited partner.

Non-Digital Assets

•In September 2020, we entered into a definitive agreement to sell five of the six hotel portfolios in our Hospitality segment and our 55.6% interest in the THL Hotel Portfolio in the Other segment, with closing expected in the first half of 2021. The transaction is valued at approximately $2.8 billion, including gross aggregate selling price of $67.5 million and acquirer's assumption of $2.7 billion of investment-level debt (of which OP share is approximately $2.3 billion).

•In February 2020, we sold our equity investment in RXR Realty, LLC for proceeds of $179 million, net of tax, recording a gain of $97 million, net of tax.

•In April 2020, we recapitalized a co-investment venture which holds common equity in the Albertsons supermarket chain, generating $73 million of proceeds to us and realizing our share of gain of approximately $30 million, which allowed us to harvest approximately 70% of the expected eventual value upfront.

•In August 2020, we conveyed to a lender 36 properties in our senior housing operating portfolio, which served as underlying collateral, in satisfaction of $157.5 million of outstanding wellness infrastructure debt.

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•In December 2020, we sold our 51% interest in the bulk industrial portfolio to our joint venture partner, and received approximately $85 million in aggregate of net equity proceeds and distributions that we expect to redeploy into future digital assets.

•During 2020, we recognized approximately $3.5 billion ($2.6 billion attributable to OP) of impairment charges and unrealized and realized fair value losses on our non-digital assets, a majority of which was driven by our accelerated timeline to digital transformation. The following amounts were recorded in impairment loss, other loss, equity method losses, and within impairment loss in discontinued operations on the statement of operations:

•$2.0 billion ($1.5 billion attributable to OP) impairment on real estate and related asset group, primarily hotel and wellness infrastructure properties, based upon (i) shortened hold period assumptions on the assets, primarily driven by the Company's accelerated digital transformation and further exacerbated by a decline in property operating performance and market values as a result of the economic effects of COVID-19, and (ii) recoverable value from sale of the THL Hotel Portfolio;

•$594 million impairment of goodwill in the Other Investment Management segment, driven by acceleration of the Company's digital transformation and a significant reduction in the value of its non-digital balance sheet assets;

•$275 million impairment on our equity investment in CLNC as the shortfall in market value over carrying value of our CLNC investment was not expected to be recovered in the near term;

•$296 million ($97 million attributable to OP) of impairment and fair value decreases on other equity method investments, generally reflecting a decrease in recoverable values based upon revised exit strategies in light of our accelerated digital transformation and the economic effects of COVID-19; and

•$324 million ($77 million attributable to OP) of net unrealized and realized losses on loans receivable carried at fair value as recoverability is affected by increasing uncertainty and deterioration in the economic environment arising from the effects of COVID-19.

Results of Operations

The following table summarizes our results from continuing operations by reportable segment.

Excluded are discontinued operations (Note 16 to the consolidated financial statements) which generated loss from discontinued operations attributable to Colony Capital, Inc. of $1.0 billion in 2020 and $79.1 million in 2018, and income from discontinued operations attributable to Colony Capital, Inc. of $360.9 million in 2019.


(In thousands)	Total Revenues						Income (Loss) from Continuing Operations						Income (Loss) Attributable to Colony Capital, Inc. from Continuing Operations








Year Ended December 31,	2020		2019		2018		2020		2019		2018		2020		2019		2018
Digital Operating	$	313,283	$	6,039	$	—	$	(130,818)	$	(691)	$	—	$	(19,784)	$	(124)	$	—
Digital Investment Management	84,420		34,368		—		9,793		48,942		3,971		9,196		44,808		3,738
Digital Other	4,160		—		—		35,922		(4,465)		1,984		23,261		(4,026)		1,868
Wellness Infrastructure	527,176		582,139		592,455		(754,709)		(243,688)		(283,516)		(503,925)		(183,510)		(199,277)
Other	293,538		570,042		570,238		(1,373,552)		(880,972)		82,572		(916,861)		(869,453)		(43,705)
Amounts not allocated to segments	14,017		14,235		9,239		(250,873)		(437,478)		(222,974)		(218,636)		(397,352)		(203,100)
	$	1,236,594	$	1,206,823	$	1,171,932	$	(2,464,237)	$	(1,518,352)	$	(417,963)	$	(1,626,749)	$	(1,409,657)	$	(440,476)

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Selected Balance Sheet Data

The following table summarizes key balance sheet data by reportable segment, excluding $3.9 billion of real estate held for disposition and $3.5 billion of debt to be assumed by the counterparties upon disposition, including debt under receivership.


	Real Estate, net				Loans Receivable (1)				Equity and Debt Investments				Debt, net
(In thousands)	December 31, 2020		December 31, 2019		December 31, 2020		December 31, 2019		December 31, 2020		December 31, 2019		December 31, 2020		December 31, 2019
Digital Operating	$	4,451,865	$	846,393	$	5,070	$	—	$	—	$	—	$	3,213,240	$	539,155
Digital Investment Management	—		—		—		—		19,167		1,059		—		—
Digital Other	—		—		31,727		—		377,048		46,832		—		—
Wellness Infrastructure	3,338,085		4,433,825		47,232		48,270		—		—		2,700,806		2,910,032


Other	937,970		937,978		1,211,308		1,518,058		1,337,522		2,262,172		1,103,131		1,218,417
Amounts not allocated to segments	—		—		—		—		3,742		3,742		772,561		850,314
Total	$	8,727,920	$	6,218,196	$	1,295,337	$	1,566,328	$	1,737,479	$	2,313,805	$	7,789,738	$	5,517,918

_________

(1) Carried at fair value upon adoption of fair value option on January 1, 2020.

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Consolidated Results of Operations

A comparative discussion of our consolidated results of operations for 2020 and 2019 is presented below.

Refer to Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2019 Annual Report on Form 10-K for comparative discussion of our consolidated results of operations for 2019 and 2018. In September 2020, our hotel business qualified as discontinued operations. The operating results of our hotel business for all periods presented have been recast as income from discontinued operations on the consolidated statements of operations. Additionally, beginning the third quarter of 2020, we disaggregated the Digital segment into three digital reportable segments, and aggregated the non-digital segments of CLNC, OED and Other IM into a single Other reportable segment. The operating results by segment have been recast for all prior periods presented. The discussion of our consolidated results of operations for 2019 and 2018 in our 2019 Form 10-K should be read in conjunction with Item 15. "Exhibits and Financial Statement Schedules" in this Annual Report, specifically the consolidated statement of operations, Note 16. Discontinued Operations and Note 23. Segment Reporting.


	Year Ended December 31,
(In thousands)	2020		2019		Change
Revenues
Property operating income	$	936,160	$	737,364	$	198,796
Interest income	80,471		166,765		(86,294)
Fee income	177,755		223,915		(46,160)
Other income	42,208		78,779		(36,571)
Total revenues	1,236,594		1,206,823		29,771
Expenses
Property operating expense	423,716		333,354		90,362
Interest expense	310,454		306,809		3,645
Investment and servicing expense	62,529		60,646		1,883
Transaction costs	5,966		3,607		2,359
Depreciation and amortization	431,443		307,594		123,849
Provision for loan loss	—		35,880		(35,880)
Impairment loss	1,473,997		1,086,530		387,467
Compensation expense—cash and equity-based	246,938		209,504		37,434
Compensation expense—carried interest and incentive fee	(8,437)		16,564		(25,001)
Administrative expenses	110,210		89,906		20,304
Settlement loss	5,090		—		5,090
Total expenses	3,061,906		2,450,394		611,512
Other income (loss)
Gain on sale of real estate	25,986		62,003		(36,017)
Other loss, net	(211,084)		(194,106)		(16,978)
Equity method losses	(455,840)		(140,384)		(315,456)
Equity method earnings (losses)—carried interest	(8,026)		11,682		(19,708)
Loss before income taxes	(2,474,276)		(1,504,376)		(969,900)
Income tax benefit (expense)	10,039		(13,976)		24,015
Loss from continuing operations	(2,464,237)		(1,518,352)		(945,885)
Income (loss) from discontinued operations	(1,326,173)		1,369,437		(2,695,610)
Net loss	(3,790,410)		(148,915)		(3,641,495)
Net income (loss) attributable to noncontrolling interests:
Redeemable noncontrolling interests	616		2,559		(1,943)
Investment entities	(812,547)		990,360		(1,802,907)
Operating Company	(302,720)		(93,027)		(209,693)
Net loss attributable to Colony Capital, Inc.	(2,675,759)		(1,048,807)		(1,626,952)
Preferred stock redemption	—		(5,150)		5,150
Preferred stock dividends	75,023		108,550		(33,527)
Net loss attributable to common stockholders	$	(2,750,782)	$	(1,152,207)	(1,598,575)

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Property Operating Income and Property Operating Expenses


	Year Ended December 31,
(In thousands)	2020		2019		Change
Property operating income:
Digital Operating	$	312,883	$	6,038	$	306,845
Digital Other	45		—		45
Wellness Infrastructure	517,186		577,669		(60,483)
Other	106,046		153,657		(47,611)
	$	936,160	$	737,364	198,796
Property operating expenses:
Digital Operating	$	119,729	$	2,197	$	117,532
Digital Other	105		—		105
Wellness Infrastructure	249,357		260,374		(11,017)
Other	54,525		70,783		(16,258)
	$	423,716	$	333,354	90,362

Digital Operating—Amounts represent income from data center leases and related services, and associated operating expenses from acquisitions of DataBank in December 2019, Vantage SDC in July 2020 and zColo in December 2020.

Digital Other—Amounts reflect activities from investments warehoused in the third quarter of 2020. These investments were transferred to DCP II in December 2020.

Wellness Infrastructure—Property operating income decreased $60.5 million, of which $56.2 million is attributed to the conveyance of a 36 property senior housing operating portfolio to the lender in August 2020, and sales of 25 and six net lease properties in 2019 and 2020, respectively. Other factors contributing to the decrease include: (i) a decline in occupancy across our senior housing operating portfolio due to restrictions on new admissions in an effort to contain COVID-19; (ii) restructuring of leases which resulted in lower rental income; (iii) an acceleration of above- and below-market lease intangibles due to the conversion of a senior housing net lease portfolio to a senior housing operating portfolio which had higher property operating income in 2019; and (iv) less recovery of previously recognized uncollectable rents and lease termination fees based on assessment of collectability. These decreases were partially offset by a gross-up of resident fee income in 2020 following the conversion of six properties from a net lease portfolio to a senior housing operating portfolio and contractual rent step-ups.

Property operating expenses decreased $11.0 million. The conveyance of the senior housing operating portfolio to the lender and the disposition of properties as noted above reduced expenses by $25.2 million, absent which property operating expenses would have increased $14.2 million. The increase was driven by a gross up of expenses following the net lease to senior housing operating conversion of six properties and incremental costs incurred in our senior housing operating facilities in response to COVID-19. The incremental COVID-19 related costs were partially abated by government stimulus funding under the CARES Act Provider Relief Fund, reflected in other income.

Refer to further discussion in "—Segment Results—Wellness Infrastructure."

Other—Property operating income and expenses decreased $47.6 million and $16.3 million, respectively, driven primarily by sales of properties in our European portfolio and U.S. multi-tenant offices, and the economic effects of COVID-19 negatively affecting rental income.

Interest Income

Interest income decreased $86.3 million, attributed to loans placed on nonaccrual in 2020 as the COVID-19 crisis has led to increased uncertainty over collectability, and loan payoffs and sales over time.

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Fee Income

Fee income is earned from the following sources:


	Year Ended December 31,
(In thousands)	2020		2019		Change
Digital Investment Management segment
Institutional funds and other investment vehicles	$	83,356	$	33,095	$	50,261
Other segment
Institutional funds and other investment vehicles	45,730		49,093		(3,363)
Public companies (CLNC, and NRE prior to its sale in September 2019)	29,739		118,049		(88,310)
Non-traded REIT	17,170		19,896		(2,726)
Other	1,760		3,782		(2,022)
Subtotal—Other segment	94,399		190,820		(96,421)
	$	177,755	$	223,915	(46,160)

Digital Investment Management—Fee income was $50.3 million higher as 50% of fees from DCP I in 2019 was recognized as equity method income from our Digital Colony Manager ("DCM") joint venture, prior to consolidation of DCM upon acquisition of DBH in July 2019. 2020 also includes fees from co-investment capital raised for the acquisitions of Zayo by DCP I in March 2020 and Vantage SDC in July 2020, and the initial close of DCP II in mid-November 2020.

Other—Fee income from the non-digital investment management business decreased $96.4 million, driven by the following:

•2019 had included termination fee of $64.6 million, inclusive of $21.5 million of incentive fees, and management fees of $11.5 million from NorthStar Realty Europe ("NRE"), previously a publicly-traded REIT managed by us that was sold in September 2019 with concurrent termination of our management agreement;

•approximately $12.0 million decrease in fees from CLNC due to a lower stockholders' equity fee base;

•$2.6 million decrease in fees from NorthStar Healthcare based on a lower net asset value ("NAV") fee base; and

•continuing liquidation of credit and opportunistic funds.

Other Income

Other income decreased $36.6 million, attributed primarily to (i) $29.2 million gross-up of other income and compensation expense related to NRE equity awards and other cash compensation paid by NRE to employees in connection with the NRE sale in 2019; and (ii) reversal of other income and compensation expense on CLNC equity awards resulting from the remeasurement of those awards at fair value based upon CLNC's stock price at each reporting period (refer to Note 19 to the consolidated financial statements in Item 15. "Exhibits and Financial Statement Schedules" of this Annual Report for a description of the accounting treatment of managed company awards).

Interest Expense


	Year Ended December 31,
(In thousands)	2020		2019		Change
Investment-level financing:
Digital Operating	$	77,976	$	1,272	$	76,704
Digital Investment Management	—		3,230		(3,230)
Wellness Infrastructure	138,182		192,621		(54,439)
Other	37,400		54,814		(17,414)
Corporate-level debt	56,896		54,872		2,024
	$	310,454	$	306,809	3,645

Net increase in interest expense of $3.6 million is attributed to the following:

Digital Operating—Amount represents interest expense on debt financing our data center business of DataBank, Vantage SDC and zColo acquired in December 2019, July 2020 and December 2020, respectively. This included prepayment penalties incurred upon refinancing of the Vantage SDC assumed debt through a new securitization in October 2020, partially offset by the write-off of debt premium in connection with the securitization.

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Digital Investment Management—Interest expense in 2019 was related to borrowings on our corporate credit

facility to partially finance the DBH acquisition in July 2019, with such borrowings repaid in December 2019 using proceeds from sale of the industrial business.

Wellness Infrastructure—Interest expense was $54.4 million lower as a result of: (i) debt repayment upon certain sales of net lease properties; (ii) conveyance of underlying collateral to lender in satisfaction of $157.5 million of outstanding debt principal in August 2020; (iii) decrease in LIBOR on debt which is predominantly variable rate; and (iv) interest expense recognized from the write-off of debt discount and prepayment penalties incurred in connection with a June 2019 refinancing. These decreases were partially offset by interest expense recognized from amortization of deferred financing costs incurred in connection with the June 2019 refinancing.

Other—Interest expense decreased $17.4 million, primarily due to debt repayments from sale of investments.

Corporate-level Debt—Interest expense increased $2.0 million as a result of writing off a portion of deferred financing costs on our corporate credit facility to reflect a reduction in borrowing capacity in June 2020, along with a higher average outstanding balance on the facility, and new exchangeable notes issued in July 2020. This increase was partially offset by the effect of lower LIBOR on our junior subordinated debt, partial repurchase of our convertible notes in the third quarter of 2020 and lower unused fees on our credit facility in 2020.

Investment and Servicing Expense

Investment and servicing costs were $1.9 million higher, attributed primarily to the write-off of investment deposit and third party fees related to investments in our other equity and debt portfolio, and management fees paid to Vantage for the day-to-day operations of Vantage SDC. These increases were largely offset by higher costs in 2019 related to refinancing of our wellness infrastructure debt, settlement of a litigation claim associated with our European investments, unconsummated deal costs and bad debt expense.

Transaction Costs

Transaction costs in 2020 represent primarily fees incurred for advisory services in connection with our corporate debt strategy, partial repurchase of the 3.875% convertible notes and corporate initiatives related to our non-digital business. In 2019, transaction costs were related primarily to our acquisitions of DBH, DataBank and the Latin American investment management business of The Abraaj Group (renamed Colony Latam).

Depreciation and Amortization

Increase in depreciation and amortization expense is attributed primarily to real estate and intangible assets from acquisitions of DBH in July 2019, DataBank in December 2019, Vantage SDC in July 2020 and zColo in December 2020. The increase was partially offset by decreases due to the effects of lower real estate basis after impairment charges, sales or held-for-sale classification of non-digital assets, termination of the NRE management contract in September 2019 and write-down of the NorthStar Healthcare management contract.

Impairment Loss


	Year Ended December 31,
(In thousands)	2020		2019		Change
Digital Investment Management	$	3,832	$	—	$	3,832
Wellness Infrastructure	716,501		187,341		529,160
Other	732,417		898,540		(166,123)
Unallocated	21,247		649		20,598
	$	1,473,997	$	1,086,530	387,467

Impairment loss attributable to OP	$	1,212,361	$	984,237

Impairment charges on real estate and goodwill are discussed further in Notes 4 and 7, respectively, to the consolidated financial statements in Item 15. "Exhibits and Financial Statement Schedules" of this Annual Report.

Digital Investment Management—Impairment reflects reduced cash flows from the original Vantage management contract, replaced by a new fee stream from third party capital raised in connection with the acquisition of Vantage SDC from its existing owners.

Wellness Infrastructure—In 2020, impairment was recognized on wellness infrastructure assets resulting primarily from shortened hold period assumptions, attributable to both the Company's accelerated digital transformation, and in contemplation of debt that was at risk of default. These assumptions resulted in a shortfall in projected future cash flows,

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which was further exacerbated by a decline in property operating performance and market values as a result of the economic effects of COVID-19, such that the carrying value of these assets would not be recoverable. Additional impairment was also recorded on two skilled nursing portfolios that were sold in 2020 and unrecoverable losses from property damage.

Impairment in 2019 arose from shortened hold period assumptions on a senior housing operating portfolio and a net lease property, a negotiated purchase option exercised by a tenant on three hospitals, and offers received on certain net lease properties.

Other—Impairment was lower in our Other IM business but higher in our OED portfolio.

In our Other IM business, impairment of $594.0 million in 2020 and $788.0 million in 2019 reflect the write-down of goodwill. This was driven by the acceleration of the Company's digital transformation and a significant reduction in the value of its non-digital balance sheet assets beginning in the fourth quarter of 2019 through 2020. The 2019 write-down also reflects the loss of future fee income from sale of the industrial business and a reduction in CLNC's fee base consistent with its reduced book value. Additionally, the NorthStar Healthcare management contract was impaired by $3.6 million in 2020 and $8.6 million in 2019 based upon a lower NAV fee base.

Within our other equity and debt portfolio, impairment was $134.8 million in 2020, an increase of $34.2 million compared to 2019. This was driven by impairment on U.S. net lease properties, attributed primarily to shortened hold period assumptions due to the Company's accelerated digital transformation or risk of default on non-recourse investment level debt; and/or the economic effects of COVID-19 on property operating cash flows and market values.

Unallocated—Impairment of $9.4 million was recorded on office operating leases in the fourth quarter of 2020 as the Company determined there is a reduced need for office space based upon the Company's current operations. 2020 also included impairment on the corporate aircraft to reflect its recoverable value. The aircraft was sold to a third party in January 2021.

Compensation Expense

The following table provides the components of compensation expense.


	Year Ended December 31,
(In thousands)	2020		2019		Change
Cash compensation and benefits	$	210,715	$	143,709	$	67,006
Equity-based compensation	34,156		29,899		4,257
Incentive and carried interest compensation	(8,437)		16,564		(25,001)
	236,434		190,172		46,262
Compensation grossed up in income and expense
NRE related cash compensation	—		3,576		(3,576)
Equity-based compensation—CLNC and NRE (prior to September 2019) awards	2,067		32,320		(30,253)
	2,067		35,896		(33,829)
Total compensation expense	$	238,501	$	226,068	12,433

Total compensation expense was $12.4 million higher, attributed primarily to full year of compensation cost associated with DBH and DataBank which were acquired in July 2019 and December 2019, respectively, and higher retention costs in 2020. These increases were largely offset by (i) $51.4 million of incremental compensation in 2019 in connection with NRE equity awards, including awards that accelerated upon the sale of NRE, along with retention and termination payments, and incentive compensation; (ii) reversals in accrued carried interest compensation as minimum return hurdles were no longer met following fair value decreases in investments held by sponsored vehicles; (iii) reversal of compensation on CLNC equity awards in 2020 as a result of remeasurement at fair value based upon CLNC's stock price; and (iv) decrease in compensation cost following the Company's cost reduction initiative and sale of NRE in September 2019.

Administrative Expenses

Administrative expense was $20.3 million higher, largely attributable to higher insurance, legal and professional service costs, and a full year of administrative costs incurred by DBH and DataBank which were acquired in July and December 2019, respectively.

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Settlement Loss

Amount represents the initial fair value of the settlement arrangement with Blackwells, when it was reached in March 2020, plus the reimbursement of Blackwells' legal costs. Refer to additional discussion in Note 12 to the consolidated financial statements in Item 15. "Exhibits and Financial Statement Schedules" of this Annual Report.

Gain on Sale of Real Estate

There were higher gains in 2019 from sales of our European properties and U.S. multi-tenant office buildings.

Gain on sale of $8.5 million in 2020 and $20.7 million in 2019 were attributable to OP.

Equity Method Earnings (Losses)


	Year Ended December 31,
(In thousands)	2020		2019		Change
Digital Investment Management (including carried interest income of $12,709 and $0)	$	13,039	$	7,112	$	5,927
Digital Other	22,548		(4,465)		27,013
Other (including carried interest reversal of $20,735 and income of $11,682)	(499,453)		(131,349)		(368,104)
	$	(463,866)	$	(128,702)	(335,164)

Digital Investment Management—Earnings represent primarily (i) gross unrealized carried interest in 2020 from a digital investment vehicle, attributed to a higher valuation of its investment in Zayo, of which the Company ultimately shares in 15%, net of carried interest compensation and noncontrolling interests; and (ii) through July 25, 2019, fee income from DCM, the manager of DCP funds which was co-owned with DBH, prior to its consolidation upon acquisition of DBH.

Digital Other—Amount represents our share of earnings from our interest in DCP I and beginning March 31, 2020, from investments held by our digital liquid securities strategy.

Other—We recorded other-than-temporary impairment on our investment in CLNC of $274.7 million and $227.9 million in the second quarters of 2020 and 2019, respectively.

Excluding the CLNC impairment, equity method losses of $224.8 million in 2020 compared to earnings of $96.6 million in 2019, arose from (i) $270.3 million of higher impairment and fair value decreases (under the fair value option), generally reflecting a decrease in recoverable values based upon revised exit strategies in light of our accelerated digital transformation and the economic effects of COVID-19; (ii) our share of investee net losses or decreases in earnings; and (iii) reversal of unrealized carried interest allocation. The losses in 2020 were partially offset primarily by $106.1 million gain from sale of our equity investment in RXR Realty. Additionally, basis difference of $83.9 million in 2020 and $141.1 million in 2019 was applied to reduce our share of net loss from CLNC (refer to Note 6 to the consolidated financial statements in Item 15. "Exhibits and Financial Statement Schedules" of this Annual Report for further discussion on CLNC).

Other Loss, Net

We recognized other net loss of $211.1 million in 2020 and $194.1 million in 2019, driven primarily by the following:

2020

•$323.7 million ($77.4 million attributable to OP) of net unrealized and realized losses on loans receivable carried at fair value as recoverability is affected by increasing uncertainty and deterioration in the economic environment arising from the effects of COVID-19 (fair value option was elected on loans receivable beginning 2020);

•$24.7 million of unrealized credit losses on CRE debt securities; and

•$20.4 million increase in the settlement liability to Blackwells, driven by an increase in the CLNY stock price; partially offset by:

•realized gain of $60.7 million and recognition of future profit allocation at fair value of $66.0 million ($32.3 million attributable to OP) from recapitalization in April 2020 of our co-investment venture which holds common equity in the Albertsons supermarket chain, followed by $16.0 million unrealized gain from subsequent increase in share price.

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2019

•realized and unrealized loss totaling $239.3 million on a non-designated interest rate swap that was intended to hedge future refinancing risk on certain wellness infrastructure mortgage debt. Such debt was refinanced in June 2019 and the swap was terminated at the end of 2019; partially offset by:

•$51.4 million gain from remeasurement of our 50% interest in DCM upon closing of the DBH acquisition (Note 3 to the consolidated financial statements).

Income Tax Benefit (Expense)

We recognized income tax benefit of $10.0 million in 2020 and income tax expense of $14.0 million in 2019.

The income tax benefit is attributed primarily to deferred tax benefit recognized in connection with our DataBank subsidiary and our OED portfolio, partially offset by the following: (i) valuation allowance established against deferred tax assets in our wellness infrastructure business due to uncertainties in future realization of net operating losses; (ii) income tax expense on a gain from sale of our equity investment in RXR Realty in February 2020; and (iii) deferred tax expense related to our wellness infrastructure business due to revaluation of deferred tax balances necessitated by a change in income tax rates in U.K.

The income tax expense in 2019 arose primarily from gains recognized on remeasurement of our preexisting interest in DCM upon the acquisition of DBH and from the sale of the industrial management platform.

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Income (Loss) from Discontinued Operations


	Year Ended December 31, 2020						Year Ended December 31, 2019						Change
(In thousands)	Hotel		Industrial		Total		Hotel		Industrial		Total		Hotel		Industrial
Revenues
Property operating income	$	573,787	$	20,217	$	594,004	$	1,119,045	$	346,431	$	1,465,476	$	(545,258)	$	(326,214)
Fee income	—		—		—		—		11,646		11,646		—		(11,646)
Interest and other income	185		79		264		486		5,163		5,649		(301)		(5,084)
Revenues from discontinued operations	573,972		20,296		594,268		1,119,531		363,240		1,482,771		(545,559)		(342,944)
Expenses
Property operating expense	489,975		5,993		495,968		757,555		93,440		850,995		(267,580)		(87,447)
Interest expense	157,287		6,665		163,952		228,729		91,863		320,592		(71,442)		(85,198)
Investment and servicing expense	16,811		20		16,831		17,612		658		18,270		(801)		(638)
Transaction costs	4,500		—		4,500		—		—		—		4,500		—
Depreciation and amortization	144,499		2,340		146,839		182,198		106,470		288,668		(37,699)		(104,130)
Impairment loss	1,107,133		—		1,107,133		59,913		—		59,913		1,047,220		—
Compensation expense—cash and equity-based	4,395		82		4,477		5,322		29,791		35,113		(927)		(29,709)
Compensation expense—carried interest	—		(489)		(489)		—		35,170		35,170		—		(35,659)
Administrative expenses	2,937		1,199		4,136		2,252		6,089		8,341		685		(4,890)
Expenses from discontinued operations	1,927,537		15,810		1,943,347		1,253,581		363,481		1,617,062		673,956		(347,671)
Other income (loss)
Gain on sale of real estate	—		15,936		15,936		913		1,457,892		1,458,805		(913)		(1,441,956)
Other gain (loss), net	9,732		—		9,732		804		1,338		2,142		8,928		(1,338)
Equity method earnings (losses), including carried interest	—		(115)		(115)		—		41,258		41,258		—		(41,373)
Income (loss) from discontinued operations before income taxes	(1,343,833)		20,307		(1,323,526)		(132,333)		1,500,247		1,367,914		(1,211,500)		(1,479,940)
Income tax benefit (expense)	(2,662)		15		(2,647)		(27)		1,550		1,523		(2,635)		(1,535)
Income (loss) from discontinued operations	(1,346,495)		20,322		(1,326,173)		(132,360)		1,501,797		1,369,437		(1,214,135)		(1,481,475)
Income (loss) from discontinued operations attributable to:
Noncontrolling interests in investment entities	(172,419)		10,651		(161,768)		(20,758)		989,358		968,600		(151,661)		(978,707)
Noncontrolling interests in Operating Company	(116,350)		955		(115,395)		(9,404)		49,391		39,987		(106,946)		(48,436)
Income (loss) from discontinued operations attributable to Colony Capital, Inc.	$	(1,057,726)	$	8,716	$	(1,049,010)	$	(102,198)	$	463,048	$	360,850	(955,528)		(454,332)

Hotel

Discontinued operations of the hotel business represent our Hospitality segment and the THL Hotel Portfolio that was previously reported in the Other segment.

Loss from discontinued operations increased $1.21 billion, attributable to the following:

•Impairment loss was $1.1 billion in 2020. Impairment resulted principally from shortened hold period assumptions, attributable to both the Company's accelerated digital transformation, and the risk that the Company is unable to obtain accommodation from lenders on non-recourse mortgage debt that is in default. These assumptions resulted in a shortfall in projected future cash flows, which was further exacerbated by a decline in property operating performance and market values as a result of the economic effects of COVID-19, such that the carrying value of the hotel assets would not be recoverable. Additional impairment was recorded based upon pending sales price net of selling costs.

In comparison, $59.9 million of impairment was recorded in 2019 on hotel assets based upon shortened hold period assumptions, unfavorable operating performance, or based upon final net proceeds from sales.

•Operating losses in 2020 reflect the loss of net income from sale of hotel properties in 2019 and the economic effects of COVID-19. There was a significant decline in room demand with average occupancy at 52% in 2020

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compared to 73% in 2019. This was further compounded by lower average daily rate ("ADR"), resulting in a 40% decline in revenue per available room ("RevPAR") compared to 2019.

•Transaction costs in 2020 are related to fees for advisory and legal services in connection with debt refinancing, portfolio restructuring and pending sale of the hotels.

•The higher income tax expense is attributed to valuation allowance established against deferred tax assets in the hotel portfolio as a result of uncertainties in future realization of net operating losses and taking into consideration a decrease in the value of these properties.

•The increase in loss from discontinued operations was partially offset by:

•Decrease in interest expense, driven by a decline in LIBOR on predominantly variable rate debt on our hotel portfolio, partially offset by additional hotel debt obtained in connection with debt refinancing in 2019 and higher deferred financing costs expensed as a result of the refinancing;

•Decrease in depreciation and amortization expense due to a lower basis on our hotel properties after significant impairment charges in 2020 and cessation of depreciation on hotels held for sale beginning fourth quarter of 2020, partially offset by capital improvements and fixed asset additions in our hotel properties that were completed throughout 2019 and early 2020; and

•Write-off of contingent liability on the THL Hotel Portfolio (recorded as other gain) as it is no longer probable that such payment would be made to a former preferred equity holder following the adverse effects of COVID-19 on the operations and performance of the THL Hotel Portfolio.

Industrial

Results of discontinued operations in 2020 represent (i) operations of the bulk industrial portfolio prior to its sale in December 2020 and a gain on sale recorded based upon depreciated carrying values; and (ii) final adjustments to proceeds from the December 2019 sale of the light industrial portfolio upon release of escrowed funds, which resulted in a loss of $7.4 million, including corresponding effect on carried interest and related compensation.

In addition to operating results from the light and bulk industrial portfolios, 2019 saw (i) significant gains from sale of the light industrial portfolio in December 2019 of approximately $1.5 billion (of which $0.9 billion was attributed to noncontrolling interests in investment entities) and $9.4 million from the associated management platform; along with (ii) recognition of significant carried interest of $69.0 million ($40.6 million as equity method earnings and $28.4 million as disproportionate allocation to the Company from noncontrolling interests in investment entities), of which approximately $35.2 million was allocated to certain employees as compensation expense.

Assets Under Management and Fee Earning Equity Under Management

Below is a summary of our third party AUM and FEEUM for our digital and other investment management business.


			AUM (1) (In billions)				FEEUM (2) (In billions)
Type	Products	Description	December 31, 2020		December 31, 2019 (3)		December 31, 2020		December 31, 2019 (3)
Digital Investment Management segment
Institutional Funds	Digital Colony Partners opportunistic strategy	Earns base management fees and potential for carried interest	$	9.3	$	4.3	$	7.0	$	3.8
	Liquid securities strategy		0.5		—		0.4		—
Other Investment Vehicles	Digital real estate and infrastructure held by portfolio companies and co-invest vehicles	Earns base management fees, business service fees and potential for carried interest	18.8		9.2		5.4		3.0
Subtotal—Digital IM			28.6		13.5		12.8		6.8
Other segment
Institutional Funds	Credit funds, opportunistic funds, value-add funds and other co-investment vehicles	Earns base and asset management fees from all managed funds; potential for carried interest from sponsored funds	7.4		8.5		4.6		5.6
Retail Companies	NorthStar Healthcare	Earns base management fees and potential for carried interest	3.4		3.4		0.7		1.2
Public Companies	Colony Credit Real Estate, Inc.(4)	NYSE-listed credit REIT	2.6		3.5		1.9		2.2
		Earns base management fees and potential for incentive income
Subtotal—Other segment			13.4		15.4		7.2		9.0
Total Company			$	42.0	$	28.9	$	20.0	$	15.8

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__________

(1) Assets for which the Company and its affiliates provide investment management services, including assets for which the Company may or may not charge management fees and/or performance allocations. AUM is based on the cost basis of managed investments as reported by each underlying vehicle as of the end of the reporting period and includes uncalled capital commitments. The Company's calculations of AUM may differ from other asset managers, and as a result, may not be comparable to similar measures presented by other asset managers.

(2) Equity for which the Company and its affiliates provide investment management services and derive management fees and/or incentives. FEEUM generally represents the basis used to derive fees, which may be based upon invested equity, stockholders’ equity, or fair value, pursuant to the terms of each underlying investment management agreement. The Company's calculation of FEEUM may differ from other asset managers, and as a result, may not be comparable to similar measures presented by other asset managers.

(3) Effective June 30, 2020, we no longer include the Company's share of AUM and FEEUM managed by third party asset managers in which we have an equity interest. AUM and FEEUM for December 31, 2019 have been revised to conform to the current definition.

(4) Represents third party ownership share of CLNC's pro rata share of total assets, excluding consolidated securitization trusts.

•Total third party FEEUM increased $4.2 billion to $20.0 billion at December 31, 2020.

•Digital FEEUM—There was a $6.0 billion or 88% increase in our digital FEEUM as we successfully raised $7.4 billion of third party capital in 2020, attributed primarily to the first closing of DCP II, co-investment vehicles for the acquisition of Vantage SDC and Zayo, and our digital liquid securities strategy. Zayo, a provider of bandwidth infrastructure services in the United States and Europe, was formerly a publicly-traded company that was taken private through the acquisition by DCP I and its co-investors.

•Other FEEUM—The increase above was partially offset by a $1.8 billion decrease in non-digital FEEUM as a result of lower asset values across our non-digital investment vehicles and continued liquidation of the institutional funds.

Segments

The following discussion summarizes key information on our reportable segments.

Digital Investment Management ("Digital IM")

This business encompasses the investment and stewardship of third party capital in digital infrastructure and real estate. The Company's flagship opportunistic strategy is conducted through DCP and separately capitalized vehicles while other strategies, including digital credit and public equities, will be or are conducted through other investment vehicles. The Company earns management fees, generally based on the amount of assets or capital managed in investment vehicles, and have the potential to earn carried interest based on the performance of such investment vehicles subject to achievement of minimum return hurdles.

Strategic Partnership in Our Digital Investment Management Business

In July 2020, we formed a strategic partnership with Wafra in which Wafra made an investment representing an approximate 31.5% interest in substantially all of our digital investment management business or the Digital IM Business, as defined for the purpose of this transaction. Wafra paid consideration of $254 million for its investment in the Digital IM Business and for warrants issued by the Company to Wafra (assuming the consideration excludes the warrants, this implies an approximately $805 million valuation of the Digital IM Business). Wafra has agreed to assume certain of the Company's existing commitments made to DCP I and to make commitments to DCP II and to the Company’s initial digital credit fund, in an aggregate amount of at least $130 million. Wafra has also agreed to make commitments to the Company's future digital funds and investment vehicles on a pro rata basis with the Company based on Wafra's percentage interest in the Digital IM Business, subject to certain caps. Wafra's investment provides us with permanent capital to pursue strategic digital infrastructure investments and grow the Digital IM Business.

DCP II

In February 2021, we held a closing of DCP II, our second digital opportunistic fund, with total callable commitments of $4.2 billion, inclusive of $120 million of our commitments as general partner and limited partner.

Fee Earning Equity Under Management

We successfully raised $7.4 billion of third party capital in 2020, which increased our Digital IM FEEUM by $6.0 billion to $13 billion at December 31, 2020. Refer to discussion in "—Assets Under Management and Fee Earning Equity Under Management."

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Operating Performance

Results of operations of our Digital IM segment are as follows:


	Year Ended December 31,
(In thousands)		2020		2019
Total revenues		$	84,420	$	34,368
Net income		9,793		48,942
Net income attributable to Colony Capital, Inc.		9,196		44,808

•Prior to July 2019, our Digital IM segment generated only equity method earnings from our 50% interest in DCM, the investment manager of DCP. DCM was consolidated upon acquisition of DBH in July 2019 and our existing interest in DCM was remeasured at fair value, resulting in a gain of $51.4 million ($39.3 million net of tax) in 2019.

•Refer to "—Consolidated Results of Operations—Fee Income" for a discussion of fee income. Fee income from our Digital IM business is trending positively in 2020, with fees from new co-invest capital raised for various acquisitions during the year and the initial close of DCP II in mid-November 2020. Operating margins, however, have seen a decline as we ramp up resources to support future investment product offerings, along with bonus accrual for the outperformance of key digital targets, particularly the successful first closing of DCP II.

Digital Operating

This business is composed of balance sheet equity interests in digital infrastructure and real estate operating companies, which generally earn rental income from providing use of space and/or capacity in or on digital assets through leases, services and other agreements. The Company currently owns interests in two companies: DataBank, an edge colocation data center business that acquired zColo's edge business in December 2020; and Vantage SDC. Both DataBank and Vantage are also portfolio companies, managed under Digital IM for the equity interests owned by third party capital.

Significant Developments

We deployed $342 million of capital into growing our data center portfolio through two new acquisitions, Vantage SDC and zColo, while simultaneously raising $1.6 billion of third party capital to co-invest alongside our balance sheet. Including DataBank that was acquired in December 2019, this brings our Digital Operating balance sheet investment to $525 million to-date. We control and consolidate all three acquisitions.

•Investment in Hyperscale Data Centers—In July 2020 and following an additional investment in October 2020, the Company, alongside third party investors, including fee bearing third party capital that the Company raised, invested $1.36 billion for approximately 90% equity interest in entities that hold Vantage's portfolio of 12 stabilized hyperscale data centers in North America and $2.0 billion of secured indebtedness, or Vantage SDC. Our balance sheet investment is $197 million, representing a 13% equity interest. Vantage SDC is our second significant balance sheet investment in a digital operating business and achieves our transformation goals on two fronts, the rotation of our balance sheet to digital assets and growing our digital investment management business.

•DataBank Strategic Investment—In December 2020, our DataBank subsidiary acquired zColo, Zayo's colocation assets, composed of 39 data centers in the U.S and U.K., for approximately $1.2 billion through a combination of debt and equity financing, including $0.5 billion of third party co-invest capital raised by us. Our balance sheet investment at December 31, 2020 was $188 million (decreased to approximately $145 million upon raising of additional third party capital in February 2021, which maintains our 20% equity interest in DataBank). Acquisition of zColo's remaining five data centers in France for $33.0 million closed in February 2021. The acquisition of zColo accelerates DataBank's edge and hybrid cloud strategy, complements its existing relationships and significantly expands its geographic footprint to a national scale in strategically important data center markets. Zayo will continue to be an anchor tenant within the zColo facilities and will become a significant customer of DataBank. With a long term agreement in place between Zayo and DataBank, the companies expect to collaborate closely in bringing colocation solutions to Zayo’s fiber customers and private fiber network solutions to DataBank’s colocation and cloud customers.

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•DataBank REIT Conversion—Our DataBank subsidiary is currently in the process of restructuring its operations in order to operate as a REIT. As such, DataBank expects to elect to be taxed as a REIT for U.S. federal income tax purposes for the taxable year beginning January 1, 2021. As a REIT, DataBank would generally not be subject to U.S. federal income taxes on its taxable income to the extent that it annually distributes such taxable income to stockholders and maintains certain asset and income requirements of a REIT. However, DataBank would be subject to U.S. federal income taxes on income earned by any of its taxable subsidiaries.

Portfolio Overview

Our data center portfolio has grown significantly with our new acquisitions in 2020, and now span across 21 states in the U.S, with three in Canada and one in U.K.


	December 31, 2020	December 31, 2019
Number of data centers
Owned	25	8
Leasehold	46	12
	71	20

Balance Sheet Information

The following table presents key balance sheet data of our Digital Operating segment:


(In thousands)	December 31, 2020		December 31, 2019
Real estate	$	4,451,865	$	846,393

Loan receivable	5,070		—
Debt	3,213,240		539,155

•The significant increases in real estate and debt balances at December 31, 2020 reflect the acquisitions of Vantage SDC and zColo, as described above.

•Loan receivable represents a loan originated by DataBank to an owner/operator of edge modular data centers.

Financing

At December 31, 2020, our data center business was financed by an aggregate $3.2 billion of outstanding debt principal, of which $2.1 billion is fixed rate debt and $1.1 billion is variable rate debt, bearing a combined weighted average interest rate of 3.69% per annum.

In October 2020 and February 2021, Vantage SDC and DataBank raised $1.3 billion and $657.9 million of securitized notes at blended fixed rates of 1.8% and 2.3%, with 6 years and 5 years maturity, respectively. In both instances, the proceeds were applied principally to refinance outstanding debt, which meaningfully reduced the overall cost of debt and extended debt maturities at Vantage SDC and DataBank.

Operating Performance

Results of operations of our Digital Operating segment are as follows.


	Year Ended December 31,
(In thousands)		2020		2019
Total revenues		$	313,283	$	6,039
Net loss		(130,818)		(691)
Net loss attributable to Colony Capital, Inc.		(19,784)		(124)

•Operating results in 2020 include a full year of results for DataBank and partial year results from the acquisitions of Vantage SDC in July 2020 and zColo in mid-December 2020, while 2019 reflects operating results for DataBank subsequent to its acquisition in late December 2019.

•Net loss includes the effects depreciation and amortization expense and interest expense, including prepayment penalties related to a Vantage SDC refinancing in October 2020 as discussed in "—Consolidated Results of Operations—Interest Expense."

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Earnings Before Interest, Tax, Depreciation and Amortization for Real Estate ("EBITDAre")

EBITDAre generated by our Digital Operating segment in 2020 is as follows. A reconciliation of the most directly comparable GAAP measure to EBITDAre is presented in "—Non-GAAP Supplemental Financial Measures." EBITDAre for DataBank's 12 days of operations in 2019 was immaterial.


(In thousands)	Year Ended December 31, 2020
Total revenues	$	313,283


Property operating expenses	(119,729)
Transaction, investment and servicing costs	(6,224)
Compensation and administrative expense	(51,125)
EBITDAre—Digital Operating	$	136,205

Digital Other

This segment is composed of equity interests in digital investment vehicles, the largest of which is the Company’s investment and commitment to the DCP flagship funds. This segment also includes the Company’s investment and commitment to the digital liquid strategies and seed investments for future digital investment vehicles.

Balance Sheet Information

The following table presents key balance sheet data of our Digital Other segment:


(In thousands)	December 31, 2020		December 31, 2019

Loan receivable	$	31,727	$	—
Equity investments
DCP I	153,872		46,832
Digital liquid securities strategy	223,176		—

•Loan receivable represents the origination of a senior term loan to a U.K. broadband provider that is warehoused on our balance sheet for a future digital credit vehicle.

•Equity investments represent primarily:

▪our equity method interest in DCP I with additional fundings in 2020;

▪interests in previous OED investment vehicles that were reclassified into our digital liquid securities strategy effective March 31, 2020 (of which $102.7 million was liquidated in January 2021); and

▪marketable equity securities held by two consolidated open-end funds in our digital liquid securities strategy, which raised additional third party capital in 2020 (our interests in the consolidated funds range between 24% and 55%).

•As of December 31, 2020, we have funded $140 million of our $190 million commitment to DCP I (including our $1.8 million investment as general partner that is reflected as an equity method investment in the Digital IM segment). No capital has been called by DCP II to-date.

Operating Performance

Results of operations of our Digital Other segment are as follows:


	Year Ended December 31,
(In thousands)		2020		2019
Interest income		$	1,355	$	—
Equity method earnings (losses)		22,548		(4,465)
Other gain, net		12,211		—
Net income (loss)		35,922		(4,465)
Net income (loss) attributable to Colony Capital, Inc.		23,261		(4,026)

•Operating results of our Digital Other segment in 2019 represent only our interest in DCP I.

•In 2020, the operating results include unrealized fair value increases in i) investments held by DCP I as it ramps up its investing activities, notably its investment in Zayo (reflected in equity method earnings); and ii) marketable equity securities held by consolidated funds in the new digital liquid securities strategy (reflected in other gain).

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Wellness Infrastructure

This segment is composed of a diverse portfolio of senior housing, skilled nursing facilities, medical office buildings, and hospitals. The Company earns rental income from senior housing, skilled nursing facilities and hospital assets that are under net leases to single tenants/operators and from medical office buildings which are both single tenant and multi-tenant. In addition, certain of the Company's senior housing properties are managed by operators under a RIDEA (REIT Investment Diversification and Empowerment Act) structure, which allows the Company to gain financial exposure to underlying operations of the facility in a tax efficient manner versus receiving contractual rent under a net lease arrangement.

We own between 69.6% and 81.3% of the various portfolios within our Wellness Infrastructure segment.

Portfolio Overview

Our wellness infrastructure portfolio is located across 30 states domestically and in the U.K. (representing 17% of our portfolio based upon NOI for the fourth quarter of 2020).

The following table presents key balance sheet data of our Wellness Infrastructure segment:


(In thousands)	December 31, 2020		December 31, 2019
Real estate
Held for investment	$	3,338,085	$	4,433,825
Held for disposition	162,952		57,664
Debt	2,700,806		2,910,032

The following table presents selected operating metrics of our Wellness Infrastructure segment:


	Number of Properties	Capacity	Average Occupancy(1)		Average Remaining Lease Term (Years)
December 31, 2020
Senior housing—operating (2)	53	4,756 units	72.8	%	N/A
Medical office buildings	106	3.8 million sq. ft.	82.4	%	4.7
Net lease—senior housing (2)	65	3,534 units	76.1	%	11.5
Net lease—skilled nursing facilities	83	9,713 beds	70.5	%	4.0
Net lease—hospitals	9	456 beds	64.9	%	9.8
Total	316
December 31, 2019
Senior housing—operating	83	6,388 units	86.5	%	N/A
Medical office buildings	106	3.8 million sq. ft.	82.2	%	4.8
Net lease—senior housing	71	4,039 units	80.7	%	11.5
Net lease—skilled nursing facilities	89	10,601 beds	82.7	%	5.8
Net lease—hospitals	9	456 beds	58.0	%	10.3
Total	358

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(1) Occupancy represents the property operator's patient occupancy for all types except medical office buildings. Average occupancy is based upon the number of units, beds or square footage by type of facility. Occupancy percentages are presented as follows: (i) as of the last day of the quarter for medical office buildings; (ii) average for the quarter for senior housing—operating; and (iii) average of the prior quarter for net lease properties as our operators report on a quarter lag.

(2) A portfolio of six senior housing properties were transitioned from net leases to operating properties in April 2020.

Conveyance to Lender

In August 2020, we indirectly conveyed the equity of certain of our wellness infrastructure borrower subsidiaries, comprising 36 properties in the senior housing operating portfolio with a carrying value of $161.6 million and $157.5 million of outstanding principal on previously defaulted debt, to an affiliate of the lender, which released us from all rights and obligations with respect to those assets and corresponding debt.

Dispositions

We sold two portfolios of net lease skilled nursing facilities, totaling six properties with 909 beds, and a land parcel in 2020, resulting in repayment of $51.5 million of associated debt.

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A portfolio of skilled nursing facilities, composed of 11 properties totaling 1,515 beds, is currently held for disposition, with a carrying value of $152.7 million and encumbered with $75.2 million of outstanding debt principal. The Company expects to apply proceeds from the sale to repay the debt.

Financing

Our wellness infrastructure portfolio is financed by $2.7 billion of outstanding debt principal, of which $0.4 billion is fixed rate debt and $2.3 billion is variable rate debt, bearing a combined weighted average interest rate of 4.04% per annum at December 31, 2020. As of the date of this filing, debt with outstanding principal of $45.0 million was in default.

Operating Performance

Results of operations of our Wellness Infrastructure segment are as follows:


	Year Ended December 31,
(In thousands)		2020		2019
Total revenues		$	527,176	$	582,139
Net loss		(754,709)		(243,688)
Net loss attributable to Colony Capital, Inc.		(503,925)		(183,510)

Operating results at the property level are discussed under NOI below. Results summarized above include the effects of interest expense from mortgage financing, impairment charges and depreciation and amortization expense on our wellness infrastructure portfolio, which are discussed in "—Results of Operations."

There was a loss of earnings in 2020 from sales of net lease properties in 2019 and also as a result of the effects of COVID-19. Additionally, the operating results of our wellness infrastructure portfolio were affected by significant real estate impairment charges of $716.5 million in 2020 and $187.3 million in 2019, resulting in significant net losses during these periods.

Net Operating Income

NOI for our Wellness Infrastructure segment is derived as follows and reconciled to the most directly comparable GAAP measure in "—Non-GAAP Supplemental Financial Measures."


	Year Ended December 31,
(In thousands)		2020		2019
Total revenues		$	527,176	$	582,139
Straight-line rent and amortization of above- and below-market lease intangibles and ground lease ROU assets		(22,018)		(20,179)
Interest income		(100)		(31)
Other income		—		(336)
Property operating expenses		(249,357)		(260,374)

NOI—Wellness Infrastructure		$	255,701	$	301,219

NOI by type of wellness infrastructure portfolio is as follows:


	Year Ended December 31,	Change 2020 vs. 2019
($ in thousands)		2020		2019		$		%
Senior housing—operating		$	47,823	$	65,077	$	(17,254)	(26.5)	%
Medical office buildings		52,258		52,681		(423)		(0.8)	%
Net lease
Senior housing		54,066		60,859		(6,793)		(11.2)	%
Skilled nursing facilities		93,366		102,527		(9,161)		(8.9)	%
Hospitals		8,188		20,075		(11,887)		(59.2)	%
NOI—Wellness Infrastructure		$	255,701	$	301,219	(45,518)		(15.1)	%

NOI decreased $45.5 million in 2020, of which $29.8 million was attributed to the conveyance of 36 properties in a senior housing operating portfolio to the lender in August 2020, and sales of 25 net lease properties in 2019 and six in 2020. The remaining decrease in NOI is attributed primarily to (i) the effects of COVID-19 on our senior housing operating portfolio as resident fee income decreased due to a decline in occupancy while incremental operating costs were incurred,

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partially offset by government stimulus funding, as discussed further below; (ii) lower rental income from unfavorable restructuring of leases; and (iii) less recovery of previously recognized uncollectable rents and lease termination fees based on assessment of collectability.

Effects of COVID-19 on our Wellness Infrastructure Segment

Our first priority has been, and continues to be, the health and safety of the residents and staff at our communities. We remain focused on supporting our operating partners during this challenging time. Concurrently, we are actively managing capital needs and liquidity to mitigate the financial impact of COVID-19 on our wellness infrastructure business.

At this time, we understand from our operators and managers that our communities as a whole continue to experience a moderate level of confirmed COVID-19 cases. The incidence of confirmed cases in our portfolio will continue and could accelerate depending on the duration, scope and depth of COVID-19.

The COVID-19 vaccine rollout began in early January 2021. Our operators and tenants have coordinated, and continue to coordinate with the respective states and administering agents to set up on-site clinics at our communities to provide the vaccine to both residents and staff. Many states have classified independent living, assisted living, skilled nursing and memory care facilities as prioritized long-term care eligible for the vaccine. The rollout has been slower than expected. To date, the resident acceptance rate has been high. Staff acceptance, however, has been lower than many of our operators and tenants would have liked and they are implementing programs to support improving those efforts.

The effect of COVID-19 varies by asset class in the Company's wellness infrastructure portfolio. Specifically, efforts to address COVID-19 have in some cases forced temporary closures of medical offices, restricted the admission of new residents to senior housing facilities, especially in communities that have experienced infections, and caused incurrence of unanticipated costs and other business disruptions. The Company is directly impacted by these factors in its RIDEA assets, and indirectly impacted in its net leased assets as these factors influence tenants’ ability to pay rent.

•In our medical office portfolio, beginning in April 2020, a number of tenants failed to make rent payments or make timely payments, and some sought more flexible payment terms or rent concessions as a result of the COVID-19 crisis. Local governments in certain jurisdictions have implemented or are considering implementing programs that permit or require forbearance of rent payments by tenants affected by COVID-19. The Company is currently engaged with affected tenants on a case-by-case basis to evaluate and respond to the current environment. The Company has agreed to provide the affected tenants with deferral of rent, generally for two to three months, with deferred rent to be repaid in monthly installments over periods of three to 18 months. This resulted in an increase in lease income receivable totaling approximately $0.2 million as of December 31, 2020. All lease income receivable, including straight-line rents, are subject to the Company's policy for evaluation of collectability based upon creditworthiness of the lessee.

•In our senior housing operating portfolio, statutory or self-imposed restrictions began to limit admission of new residents into our communities starting in March 2020 in an effort to contain COVID-19. Also, we continue to face challenges from existing communities that have experienced infections, heightened risk of resident and staff illness and resident move-outs, particularly in those communities that have experienced infections. There is typically a period of time where restrictions on admissions continue to be imposed in communities that have experienced infections until such time that infections are no longer detected. As a result, we anticipate a decline in occupancy to continue as the rate of resident move-outs continue to outpace new resident admissions. In addition, there have been other factors impacting our operators’ ability to move in new residents, including: health and safety concerns of prospective new residents and their loved ones; restricted access to community dining, amenities and other lifestyle benefits; inability to tour communities in person; quarantine requirements upon initial move-in to a community; and limitations on families’ ability to visit their loved ones.

•Operating costs in our senior housing operating portfolio have risen as our healthcare operators take action to protect their residents and staff, specifically higher labor costs, as well as higher usage and cost of personal protective equipment, and medical and sanitation supplies. We incurred $12.2 million of such incremental costs, of which $6.0 million was abated through income received from government stimulus funding under the CARES Act Provider Relief Fund.

•Our senior housing net leased portfolio and skilled nursing net leased portfolio have experienced similar challenges. In addition, for our skilled nursing portfolio, the deferral of elective surgeries has also impacted occupancy. However, we generally have continued to collect rent from our operators, in part due to the benefits of various federal relief programs.

The challenges faced by our healthcare operators and our tenants as a result of COVID-19 will continue to put pressure on future revenues and operating margins in our Wellness Infrastructure segment.

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As necessary, we will engage in discussions with our lenders on the deferral of payment obligations, and/or waiver of defaults for any potential failure in the future to satisfy certain financial or other covenants.

Given the ongoing nature of the pandemic, the extent of the financial effects and how prolonged the effects will be to our wellness infrastructure business is uncertain at this time, and largely dependent on the duration and severity of the COVID-19 crisis.

Other

This segment is composed of our other equity and debt or OED investments and non-digital investment management or Other IM business.

OED encompasses a diversified group of non-digital real estate and real estate-related equity and debt investments, including investments for which the Company acts as a general partner and/or manager ("GP co-investments") and receives various forms of investment management economics on related third-party capital on such investments, which includes our investment in CLNC, among other holdings. The Company has monetized a substantial portion of its OED portfolio and will continue to monetize the remainder as it completes its digital evolution.

Other IM, which is separate from Digital IM, encompasses the Company’s management of private real estate credit funds and related co-investment vehicles, CLNC, and NorthStar Healthcare. Many of the investments underlying these vehicles are co-owned by the Company’s balance sheet and categorized under OED. The Company earns management fees, generally based on the amount of assets or capital managed, and contractual incentive fees or potential carried interest based on the performance of the investment vehicles managed subject to achievement of minimum return hurdles.

Balance Sheet Information

Investments and debt financing in our Other segment, excluding the THL Hotel Portfolio which is classified as discontinued operations, are summarized below:


(In thousands)	December 31, 2020		December 31, 2019
Real estate
Held for investment	$	937,970	$	937,978
Held for disposition	235,768		353,724
Equity and debt investments
CLNC	385,193		725,443
Interests in our sponsored and co-sponsored funds	41,361		67,164
Other equity investments (1)	882,392		1,411,974
CRE debt securities	28,576		57,591

Loans receivable (2)	1,211,308		1,518,058

Debt (3)	1,103,131		1,218,417

_________

(1) Significant investments include acquisition, development and construction loans accounted for as equity method investments totaling $491.0 million at December 31, 2020 and $543.3 million at December 31, 2019.

(2) Carried at fair value upon adoption of fair value option on January 1, 2020.

(3) Includes debt carrying value of $155.4 million at December 31, 2020 and $200.6 million at December 31, 2019 related to real estate held for disposition.

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Operating Performance

Our Other segment generated the following results of operations:


	Year Ended December 31, 2020						Year Ended December 31, 2019
(In thousands)	OED		Other IM		Total		OED		Other IM		Total
Property operating income	$	106,046	$	—	$	106,046	$	153,657	$	—	$	153,657
Interest income	69,330		42		69,372		158,703		1,241		159,944
Fee income	—		94,399		94,399		—		190,820		190,820
Other income	7,901		15,820		23,721		11,183		54,438		65,621
Total revenues	183,277		110,261		293,538		323,543		246,499		570,042

Equity method earnings (losses)	(577,198)		77,745		(499,453)		(125,429)		(5,920)		(131,349)

Net income (loss)	(1,130,521)		(469,209)		(1,599,730)		(152,852)		(739,208)		(892,060)
Net income (loss) attributable to Colony Capital, Inc.	(606,426)		(422,510)		(1,028,936)		(224,717)		(643,631)		(868,348)

OED

•Earnings from our real estate investments, loans receivable and equity method investments in the OED portfolio have declined over time as we continue to monetize our investments. The decrease also reflects the effects of COVID-19 and the acceleration of our digital transformation in 2020. The large net losses in both years, however, resulted primarily from significant write-down in asset values, namely (i) impairment of our equity investment in CLNC in both years and our acquisition, development and construction ("ADC") loans in 2020; (ii) unrealized losses on loans receivable and equity method investments carried at fair value in 2020; and (iii) real estate impairment in both years. Refer to further discussion in "—Results of Operations."

•The OED portfolio represents a meaningful source of liquidity from our ongoing efforts to monetize these investments. In 2020, we have monetized a substantial portion of our OED portfolio totaling approximately $700 million, achieving the high end of our target for 2020. This includes equity investments in the Other IM business as discussed below, and our 51% interest in the bulk industrial portfolio. We will continue to monetize the remaining assets in our Other segment as we complete our digital evolution.

Other IM

•Similar to monetization of the OED portfolio, we sold our equity interest in RXR Realty in February 2020 for proceeds of $179 million (net of tax), recording a gain of $97 million (net of tax). This represents one of two equity investments in third party real estate asset managers held in the Other IM business.

•The above gain was offset by significant goodwill impairment and a reversal of carried interest allocation in 2020. 2019 was also affected by significant impairment charges, notably goodwill impairment. Fee income from the Other IM business has continued to decline over time, with the higher fees in 2019 attributed to a large one time incentive and termination payment from NRE. Other income in the Other IM segment represents primarily cost reimbursement income from affiliates which has a corresponding gross-up in expenses, with no effect on net loss. Refer to further discussion in "—Results of Operations."

•The Other IM business is expected to run off over time as limited life investment vehicles are in the liquidation phase and no new third party capital is expected to be raised in the non-digital business.

Non-GAAP Supplemental Financial Measures

The Company reports funds from operations ("FFO") as an overall non-GAAP supplemental financial measure. The Company also reports EBITDAre for the Digital Operating segment and NOI for the Wellness Infrastructure segment, which are supplemental non-GAAP financial measures widely used in the equity REIT industry. These non-GAAP measures should not be considered alternatives to GAAP net income as indications of operating performance, or to cash flows from operating activities as measures of liquidity, nor as indications of the availability of funds for our cash needs, including funds available to make distributions. Our calculation of FFO, EBITDAre and NOI may differ from methodologies utilized by other REITs for similar performance measurements, and, accordingly, may not be comparable to those of other REITs.

Funds from Operations

We calculate FFO in accordance with standards established by the National Association of Real Estate Investment Trusts ("NAREIT"), which defines FFO as net income or loss calculated in accordance with GAAP, excluding (i)

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extraordinary items, as defined by GAAP; (ii) gains and losses from sales of depreciable real estate; (iii) impairment write-downs associated with depreciable real estate; and (iv) gains and losses from a change in control in connection with interests in depreciable real estate or in-substance real estate; plus (v) real estate-related depreciation and amortization; and (vi) including similar adjustments for equity method investments. Included in FFO are gains and losses from sales of assets which are not depreciable real estate such as loans receivable, equity method investments, and equity and debt securities, as applicable.

We believe that FFO is a meaningful supplemental measure of the operating performance of our business because historical cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time, as reflected through depreciation. Because real estate values fluctuate with market conditions, management considers FFO an appropriate supplemental performance measure by excluding historical cost depreciation, gains related to sales of previously depreciated real estate, and impairment of previously depreciated real estate which is an early recognition of loss on sale.

The following table presents a reconciliation of net income attributable to common stockholders to FFO attributable to common interests in Operating Company and common stockholders. Amounts in the table include our share of activity in unconsolidated ventures.


	Year Ended December 31,
(In thousands)		2020		2019
Net loss attributable to common stockholders		$	(2,750,782)	$	(1,152,207)
Adjustments for FFO attributable to common interests in Operating Company and common stockholders:
Net loss attributable to noncontrolling common interests in Operating Company		(302,720)		(93,027)
Real estate depreciation and amortization		561,195		548,766
Impairment of real estate		1,956,662		351,395
Gain on sales of real estate		(41,912)		(1,524,290)
Less: Adjustments attributable to noncontrolling interests in investment entities(1)		(638,709)		719,225
FFO attributable to common interests in Operating Company and common stockholders		$	(1,216,266)	$	(1,150,138)

__________

(1) The components of adjustments attributable to noncontrolling interests in investment entities for FFO are as follows:


	Year Ended December 31,
(In thousands)		2020		2019
FFO adjustments attributable to noncontrolling interests in investment entities:
Real estate depreciation and amortization		$	259,543	$	170,024
Impairment of real estate		403,770		111,231
Gain on sales of real estate		(24,604)		(1,000,480)
		$	638,709	$	(719,225)

EBITDAre

We calculate EBITDAre for our Digital Operating segment in accordance with standards established by NAREIT, which defines EBITDAre as net income or loss calculated in accordance with GAAP, excluding (i) interest expense; (ii) income tax benefit (expense); (iii) depreciation and amortization; (iv) gains on disposition of depreciated real estate, including gains or losses on change of control; (v) impairment of depreciated real estate and of investments in unconsolidated affiliates, if any, caused by a decrease in value of depreciated real estate in the affiliate; and (vi) including similar adjustments for equity method investments, if any, to reflect the Company's share of EBITDAre of unconsolidated affiliates

EBITDAre represents a widely known supplemental measure of performance, EBITDA, but for real estate entities, which we believe is particularly helpful for generalist investors in REITs. EBITDAre depicts the operating performance of a real estate business independent of its capital structure, leverage and noncash items, which allows for comparability across real estate entities with different capital structure, tax rates and depreciation or amortization policies. Additionally, exclusion of gains on disposition and impairment of depreciated real estate, similar to FFO, also provides a reflection of ongoing operating performance and allows for period-over-period comparability.

As with other non-GAAP measures, the usefulness of EBITDAre may be limited. For example, EBITDAre focuses on profitability from operations, and does not take into account financing costs, and capital expenditures needed to maintain operating real estate.

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NOI

NOI for our Wellness Infrastructure segment represents total property and related income less property operating expenses, adjusted primarily for the effects of (i) straight-line rental income adjustments; and (ii) amortization of acquired above- and below-market lease adjustments to rental income, where applicable.

We believe that NOI is a useful measure of operating performance of our wellness infrastructure portfolio as it is more closely linked to the direct results of operations at the property level. NOI also reflects actual rents received during the period after adjusting for the effects of straight-line rents and amortization of above- and below-market leases; therefore, a comparison of NOI across periods better reflects the trend in occupancy rates and rental rates at our properties.

NOI excludes historical cost depreciation and amortization, which are based upon different useful life estimates depending on the age of the properties, as well as adjust for the effects of real estate impairment and gains on sales of depreciated properties, which eliminate differences arising from investment and disposition decisions. This allows for comparability of operating performance of our properties period over period and also against the results of other equity REITs in the same sector.

Additionally, by excluding corporate level expenses or benefits such as interest expense, any gain or loss on early extinguishment of debt, and income taxes, which are incurred by the parent entity and are not directly linked to the operating performance of our properties, NOI provides a measure of operating performance independent of our capital structure and indebtedness.

However, the exclusion of these items as well as others, such as capital expenditures and leasing costs, which are necessary to maintain the operating performance of our properties, and transaction costs and administrative costs, may limit the usefulness of NOI.

Reconciliation of Non-GAAP Financial Measures

The following tables present reconciliations of net loss of the Digital Operating segment to EBITDAre, and net loss of the Wellness Infrastructure segment to NOI.


	Digital Operating				Wellness Infrastructure
	Year Ended December 31, 2020		Year Ended December 31,
(In thousands)				2020			2019
Net loss	$	(130,818)			$	(754,709)		$	(243,688)
Adjustments:
Straight-line rent and amortization of above- and below-market lease intangibles and ground lease ROU assets	—				(22,018)			(20,179)
Interest income	—				(100)			(31)
Other income	—				—			(336)
Interest expense	77,976				138,182			192,621
Transaction, investment and servicing costs	—				7,131			16,351
Depreciation and amortization	210,263				138,312			161,115
Provision for loan losses	—				—			—
Impairment loss	—				716,501			187,341
Compensation and administrative expense	—				16,210			12,773
Gain on sale of real estate	—				(175)			(1,384)
Other (gain) loss, net	245				(3,351)			(2,752)
Income tax (benefit) expense	(21,461)				19,718			(612)
EBITDAre / NOI	$	136,205			$	255,701		$	301,219

Liquidity and Capital Resources

Overview

We believe that our capital resources are sufficient to meet our short-term and long-term capital requirements.

We have substantially addressed our near-term corporate maturity obligations and enhanced our long-term capital structure and liquidity profile through the following:

•amendment and extension of our corporate credit facility, which reduced our borrowing capacity and provided enhanced financial flexibility;

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•issuance of new exchangeable notes and repayment of convertible notes due in January 2021, which allowed us to reduce our near term maturity obligations; and

•strategic investment by Wafra of over $400 million, including over $250 million for a 31.5% ownership interest in our Digital IM business. Wafra has also assumed certain of our existing commitments to DCP I and agreed to make commitments to our future digital funds and investment vehicles on a pro rata basis with us based on Wafra's percentage interest in the Digital IM Business, subject to certain caps.

As of February 22, 2021, our liquidity position was $700 million, composed of cash on hand and availability under our corporate credit facility.

We have also completed a new cost reduction program in 2020 with cost savings, mostly from headcount and compensation related cost reductions, of approximately $55 million on an annual run-rate basis, with $30 million incurred in related charges.

We regularly evaluate our liquidity position, debt obligations, and anticipated cash needs to fund our operating and investing activities, based upon our projected financial and operating performance, and investment opportunities as we divest non-digital assets and complete our digital transformation. Our evaluation of future liquidity requirements is regularly reviewed and updated for changes in internal projections, economic conditions, competitive landscape and other factors. At this time, while we are in compliance with all of our corporate debt covenants and have sufficient liquidity to meet our operational needs, we continue to evaluate alternatives to manage our capital structure and market opportunities to strengthen our liquidity and provide further operational and strategic flexibility. Stabilizing our capital structure and liquidity has put us in a stronger position to execute our digital transformation.

Liquidity Needs and Sources of Liquidity

Our current primary liquidity needs are to fund:

•our general partner and co-investment commitments to our investment vehicles;

•acquisitions of target digital assets for our balance sheet and related ongoing commitments;

•principal and interest payments on our debt;

•our operations, including compensation, administrative and overhead costs;

•obligation for lease payments, principally leasehold data centers and corporate offices;

•capital expenditures for our real estate investments;

•distributions to our common and preferred stockholders (to the extent distributions have not been suspended); and

•income tax liabilities of taxable REIT subsidiaries and of the Company subject to limitations as a REIT.

Our current primary sources of liquidity are:

•cash on hand;

•our corporate revolving credit facility;

•cash flow generated from our investments, both from operations and return of capital;

•fees received from our investment management business, including incentive or carried interest payments, if any;

•proceeds from full or partial realization of investments and/or businesses, particularly from investments in the Other segment;

•investment-level financing;

•proceeds from public or private equity and debt offerings; and

•third party co-investors in our consolidated investments and/or businesses.

Liquidity Needs

Investment Commitments

Our investment commitments as of December 31, 2020 include primarily $192 million of unfunded capital commitments to Company-sponsored and third-party sponsored funds, of which $141 million is for DCP I and DCP II, after assumption by Wafra of $60 million of our DCP I commitments. Separately, Wafra has also acquired a participation interest and is responsible for $17 million of our remaining $50 million unfunded commitments to DCP I. We expect to fund our remaining investment commitments through cash on hand and/or proceeds from future asset monetization.

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Lease Obligations

At December 31, 2020, we have $216.6 million and $591.0 million of finance and operating lease obligations, respectively, that were assumed through acquisitions, primarily leasehold data centers and to a lesser extent, ground leases on certain investment properties, and $60.2 million of operating lease obligations on corporate offices. These amounts represent fixed lease payments on an undiscounted basis, excluding any contingent or other variable lease payments, and factor in lease renewal or termination options only if it is reasonably certain that such options would be exercised. Certain lease payments under ground leases are recoverable from our tenants. These lease obligations will be funded through operating cash generated by the investment properties and corporate operating cash, respectively. Our lease obligations, including future fixed lease payments, is described further in Note 22 to the consolidated financial statements in "Item 15. Exhibits and Financial Statement Schedules" of this Annual Report.

Dividends

U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its net taxable income. These distribution requirements may constrain our ability to accumulate operating cash flows. We intend to pay regular quarterly dividends to our stockholders in an amount equal to our net taxable income, if and to the extent authorized by our board of directors. Before we pay any dividend, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and debt service, including complying with any restrictions imposed by our lenders. If our cash available for distribution is less than our net taxable income, we may be required to sell assets or borrow funds to make cash distributions or we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities.

Common Stock—The Company paid a first quarter 2020 dividend of $0.11 per share of common stock, totaling $52.9 million. The Company suspended dividends on its class A common stock beginning with the second quarter of 2020. Under the terms of the Company's amended credit facility, the Company is restricted from paying common dividends other than to maintain the Company’s status as a REIT or to reduce income tax payments. The Company will continue to monitor its financial performance and liquidity position, and as economic conditions improve, the Company will reevaluate its dividend policy in consultation with its revolver lending group.

Preferred Stock—At December 31, 2020, the Company's outstanding preferred stock, totaling $1.03 billion in liquidation preference, bears a weighted average dividend rate of 7.165% per annum, with aggregate cash distributions of $18.5 million per quarter.

Sources of Liquidity

Cash From Operations

Our investments generate cash, either from operations or as a return of our invested capital. We primarily generate revenue from net operating income of our real estate properties, and expect such earnings to be increasingly sourced from our Digital Operating segment as we complete our digital transformation. We also generate interest income from commercial real estate related loans and securities as well as receive periodic distributions from our equity investments, including our GP co-investments. Such income is offset by interest expense associated with non-recourse borrowings on our investments.

Additionally, we generate fee revenue from our investment management business, with increasing contribution of fees from our digital investment management business following the significant growth in digital FEEUM in 2020. Management fee income is generally a predictable and stable revenue stream, while carried interest and contractual incentive fees are by nature less predictable in amount and timing. Our ability to establish new investment vehicles and raise investor capital depends on general market conditions and availability of attractive investment opportunities as well as availability of debt capital.

Following the onset of COVID-19, our hotel properties, as a whole, generated negative operating cash flows in April and May 2020, having recovered to slightly positive operating cash flows since June 2020. We have since taken various steps to minimize operating expenses, as appropriate, in order to minimize cash needs, as we continue to operate these hotels prior to finalizing the sale of these assets, which is expected to close in the first half of 2021. Any cash flows generated from hotel assets that are in receivership, however, are controlled by the receivers and applied to service the underlying debt.

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Asset Monetization

We periodically monetize our investments through asset sales that are opportunistic in nature or to recycle capital from non-core assets.

In 2020, we have monetized a substantial portion of our OED portfolio totaling approximately $700 million, achieving the high end of our target for 2020. This includes equity investments in the Other IM business and our 51% interest in the bulk industrial portfolio. We will continue to monetize the remaining assets in our Other segment as we complete our digital evolution.

Debt

Descriptions of our debt and future scheduled debt principal payments are included in "Item 15. Exhibits and Financial Statement Schedules" of this Annual Report, specifically in Note 10 to the consolidated financial statements (and Note 8 for debt related to assets held for disposition).

Summary of Indebtedness

Our indebtedness at December 31, 2020 is summarized as follows:


($ in thousands)	Outstanding Principal		Weighted Average Interest Rate (Per Annum)		Weighted Average Years Remaining to Maturity (1)
Corporate credit facility	$	—	—	%	1.0
Convertible and exchangeable senior notes	545,107		5.36	%	3.6
Junior subordinated debt	280,117		3.10	%	15.4
Other secured debt (2)	32,815		5.02	%	—
Non-recourse investment level financing
Fixed rate	2,823,973		3.20	%	4.3
Variable rate	4,249,446		4.33	%	3.4
	7,073,419
Total debt (excluding amounts related to assets held for disposition)	$	7,931,458

Debt related to assets held for disposition—Hotels (3)	$	3,529,026

__________

(1) Calculated based upon initial maturity dates, or extended maturity dates if extension criteria are met and extension is available at the Company's option

(2) Debt secured by corporate aircraft was repaid in January 2021 upon sale of the aircraft.

(3) Composed of $2.7 billion of debt expected to be assumed by the buyer upon sale of hotel assets and $780 million of hotel debt that is currently under receivership.

Recent Developments

Corporate Credit Facility

•We amended our Credit Agreement in June 2020, which reduced aggregate revolving commitments and increased the borrowing rate. The amended terms provide for greater financial covenant flexibility and more borrowing base credit for digital investments. We exercised our first 6-month extension option in December 2020. At this time, we expect to either exercise our second extension option or otherwise replace the existing credit facility.

Key terms and current status of our corporate credit facility are as follows:

▪Maximum principal amount of $450 million (which will be reduced to $400 million on March 31, 2021)

▪Maturity of July 2021, with one remaining six-month extension option

▪Interest rate of LIBOR + 2.75%

▪Full $450 million available to be drawn as of the date of this filing

Convertible and Exchangeable Senior Notes

•In July 2020, we issued $300 million of exchangeable senior notes maturing in July 2025, bearing interest at 5.75% per annum, and repaid $402.5 million of convertible notes due in January 2021, which allowed us to reduce our near term maturity obligations while also preserving $300 million of liquidity. As a result, we have no corporate debt maturities (other than our corporate credit facility) until 2023.

Non-Recourse Investment-Level Financing

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Investment level financing is non-recourse to us, and secured by the respective underlying commercial real estate or mortgage loans receivable.

•Digital Operating—2020 includes $2.0 billion of debt assumed from the acquisition of Vantage SDC in July and $550 million of debt obtained by DataBank to finance its acquisition of zColo in December.

Subsequently, in October 2020 and February 2021, Vantage SDC and DataBank raised $1.3 billion and $657.9 million of securitized notes at blended fixed rates of 1.8% and 2.3%, with 6 years and 5 years maturity, respectively. In both instances, the proceeds were applied principally to refinance outstanding debt, which meaningfully reduced the overall cost of debt and extended debt maturities at Vantage SDC and DataBank.

•Hotels—Upon closing of the sale of our hotel assets which is anticipated in the first half of 2021, $2.7 billion of the underlying debt is expected to be assumed by the acquirer, which would result in a significant deleveraging of our balance sheet.

Public Offerings

We may offer and sell various types of securities under our shelf registration statement. These securities may be issued from time to time at our discretion based on our needs and depending upon market conditions and available pricing.

Cash Flows

The following table summarizes the activities from our statements of cash flows.


	Year Ended December 31,
(In thousands)	2020		2019
Net cash provided by (used in):
Operating activities	$	89,893	$	170,868
Investing activities	(1,931,980)		4,198,938
Financing activities	1,373,027		(3,779,586)

Operating Activities

Cash inflows from operating activities are generated primarily through property operating income from our real estate investments, interest received from our loans and securities portfolio, distributions of earnings received from equity investments, and fee income from our investment management business. This is partially offset by payment of operating expenses supporting our various lines of business, including property management and operations, loan servicing and workout of loans in default, investment transaction costs, as well as compensation and general administrative costs.

Our operating activities generated net cash inflows of $89.9 million in 2020 and $170.9 million in 2019.

Notable items affecting operating cash flows included the following:

2020

•contribution of operating cash flows from our Digital Operating segment in 2020, specifically the DataBank business that was acquired in December 2019 using proceeds from sale of the light industrial business, and Vantage SDC acquired in July 2020; and

•the negative effects on operating cash flows from the economic fallout of COVID-19, particularly in our hotel business, as noted below.

2019

•prior to the sale of the entire light industrial business in December 2019, our industrial business contributed $158.7 million of operating cash inflows following the acquisition of a large portfolio in February 2019;

•incentive and termination fees of $64.6 million were received upon termination of our management agreement concurrent with the sale of NRE in September 2019; and

•significantly higher operating cash flows were generated from our hotel business in 2019 of $157.7 million compared to $8.7 million in 2020 post COVID-19; all of which were partially offset by

•payment of $365.1 million for settlement of the $2.0 billion notional amount on the forward starting interest rate swap assumed through the Merger.

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Investing Activities

Investing activities include primarily cash outlays for acquisition of real estate, disbursements on new and/or existing loans, and contributions to unconsolidated ventures, which are partially offset by repayments and sales of loans receivable, distributions of capital received from unconsolidated ventures, and proceeds from sale of real estate and equity investments.

Our investing activities generated net cash outflows of $1.9 billion in 2020 compared to net cash inflows of $4.2 billion in 2019.

•Real estate investments—Real estate acquisitions and sales were the biggest driver of investing cash flows in 2020 and 2019, respectively.

2020 saw net cash outflows of $2.1 billion, with the acquisitions of Vantage SDC in July 2020 and zColo in December 2020.

In contrast, there was $4.2 billion of net cash inflows in 2019 with the receipt of $6.1 billion of proceeds from real estate sales, offset by payments of $1.9 billion for real estate acquisitions. We had acquired a large portfolio in our industrial segment for $1.1 billion in February 2019 and in December 2019, we received proceeds from the sale of our entire light industrial portfolio of $5.1 billion, net of $0.3 billion of debt assumed by the buyer, closing costs and other prorations.

•Equity investments—In 2020, the investing cash outflows for real estate acquisitions were partially offset by net cash inflows from our equity investments of $152.3 million. In particular, we received $179.1 million of net proceeds from sale of our investment in RXR Realty and $87.4 million from recapitalization of our joint venture investment in Albertsons, representing amounts recognized as a return of investment. Both of these inflows were partially offset by contributions to DCP I of $130.2 million and additional draws on ADC loans that are accounted for as equity method investments.

In 2019, our equity investments also contributed net cash inflows of $142.5 million, which included $96.0 million of proceeds from sale of our interest in NRE .

•Debt investments—Our loan and securities portfolio generated immaterial net cash inflows in 2020 compared to $168.8 million in 2019 as loan repayments largely outpaced disbursements in 2019.

•Business acquisition—In 2019, the investing net cash inflows were partially offset by cash paid for business acquisitions, specifically $184.2 million for DBH and $172.4 million for DataBank, net of cash assumed.

Financing Activities

We finance our investing activities largely through investment-level secured debt along with capital from third party or affiliated co-investors. We also draw upon our corporate credit facility to finance our investing and operating activities, as well as have the ability to raise capital in the public markets through issuances of preferred stock, common stock and debt such as our convertible notes. Accordingly, we incur cash outlays for payments on our investment-level and corporate debt, dividends to our preferred and common stockholders, as well as distributions to our noncontrolling interests.

Financing activities generated net cash inflows of $1.4 billion in 2020 compared to net cash outflows of $3.8 billion in 2019.

2020

•The financing cash inflows in 2020 were driven primarily by $1.8 billion of net contributions from noncontrolling interests, of which $1.5 billion represents third party investors in Vantage SDC and zColo, primarily fee bearing capital that we raised, and $253.6 million was an investment by Wafra in our digital investment management business.

•Additionally, borrowings on our investment level debt exceeded repayments for a net cash inflow of $278.1 million, which included $550.0 million of debt drawn to finance our acquisition of zColo.

•However, the financing cash inflows in 2020 were partially offset by: (i) cash outflow of $402.9 million in January 2020 for settlement of the December 2019 redemption of our Series B and E preferred stock using proceeds from our industrial sale; (ii) dividends paid on our preferred and common stock of $185.8 million which, in comparison to 2019, have been significantly reduced as a result of the preferred stock redemption in December 2019 and suspension of common stock dividends beginning the second quarter of 2020; and (iii) partial repurchase of our convertible senior notes for $81.3 million through a tender offer in September 2020. An additional repurchase of

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our convertible senior notes for $289.7 million was made through a concurrent application of all of the net proceeds from our issuance of $300.0 million of new exchangeable senior notes in July 2020.

2019

•In contrast, the financing cash outflows in 2019 were driven by net distributions to noncontrolling interests of $2.3 billion, principally the distributions of net proceeds from the sale of our light industrial portfolio in December 2019.

•Additionally, debt repayments exceeded borrowings by $1.2 billion, driven by repayment of $1.7 billion of debt in our light industrial portfolio upon disposition, of which $952.0 million had been borrowed during the year.

•Further contributing to financing cash outflows in 2019 were dividends paid on our preferred and common stock totaling $322.7 million, which were significantly higher compared to 2020, as noted above.

Guarantees and Off-Balance Sheet Arrangements

In connection with financing arrangements for certain unconsolidated ventures, we provided customary non-recourse carve-out guarantees. In addition, we have entered into guarantee or contribution agreements with certain hotel franchisors or operating partners, pursuant to which we guaranteed or agreed to contribute to the franchisees’ obligations, including payments of franchise fees and marketing fees, for the term of the agreements. However, we believe that the likelihood of making any payments under the guarantees is remote.

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with GAAP, which requires the use of estimates and assumptions that involve the exercise of judgment and that affect the reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our critical accounting policies and estimates are integral to understanding and evaluating our reported financial results as they require subjective or complex management judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain and unpredictable.

Highlighted below are accounting policies and estimates that we believe to be critical based on the nature of our

business and/or require significant management judgment and assumptions. With respect to all critical estimates discussed below, we have established policies and control procedures which seek to ensure that estimates and assumptions are appropriately governed and applied consistently from period to period. We believe that all of the decisions and assessments applied were reasonable at the time made, based upon information available to us at that time.

Due to the inherently judgmental nature of the various projections and assumptions used, unpredictability of economic and market conditions, uncertainty as to the timing and the manner by which the assets in our Other segment would be monetized and the recoverable values upon monetization, and uncertainties over the duration and severity of the resulting economic effects of COVID-19, actual results may differ from estimates, and changes in estimates and assumptions could have a material effect on our financial statements in the future.

Impairment

In connection with our review and preparation of the financial statements, prior to and subsequent to each quarter end, we evaluate if prevailing events or changes in circumstances indicate that carrying values of the following assets may not be recoverable, in which case, an impairment analysis is performed.

Real Estate Held for Investment

Triggering events that may indicate potential impairment of our real estate held for investment include, but are not limited to, the Company's shortened hold period assumptions, which in 2020, was attributed to the Company's accelerated digital transformation or in contemplation of underlying mortgage debt that is in default or was at risk of default; deterioration in current and/or projected net operating income; significant near-term lease expirations; decline in occupancy; or other tenant, operator or market conditions that would negatively affect property operating cash flows.

The carrying amount of real estate held for investment is not recoverable if it exceeds the undiscounted future net cash flows expected to be generated by the property, including any estimated proceeds from eventual disposition of the property. If multiple outcomes are under consideration, the Company may apply either a probability-weighted cash flows approach or the single-most-likely estimate of cash flows approach, whichever is more appropriate under the circumstances. Impairment is recognized to reduce the carrying value of the property to its estimated fair value, generally based upon a discounted net cash flow analysis which applies a terminal capitalization rate at the end of the projection

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period to derive an exit value, or a direct capitalization approach which applies an overall capitalization rate to expected net operating income to estimate current property value.

Estimation of future net cash flows involves significant judgment and assumptions, including, but not limited to, the Company's anticipated hold period; probability-weighting to different cash flow scenarios or the determination of the single-most-likely cash flow scenario, where applicable; available market information such as competition levels, leasing trends, occupancy trends, lease or room rates, and market prices of similar properties recently sold or currently being offered for sale; and capitalization rates.

Refer to Note 4 of the consolidated financial statements for a discussion of impairment recorded on real estate held for investment, including triggering events, and methodology and inputs applied in estimating the fair value of impaired properties.

Equity Method Investments

Significant equity method investments that are subject to periodic impairment assessment include the Company's investment in CLNC and ADC loans.

Indicators of impairment on equity method investments generally include the Company's shortened hold period assumptions, which in 2020, was attributed to the Company's accelerated digital transformation; significant deterioration in earnings performance, asset quality, or business prospects of the investee; or significant adverse change in the industry, economic, or market environment of the investee.

If indicators of impairment exist, the Company estimates the fair value of its equity method investment, which considers factors such as the estimated enterprise value of the investee, fair value of the investee's underlying net assets, or net cash flows to be generated by the investee, and for equity method investees with publicly-traded equity, the traded price of the equity securities in an active market.

Further consideration is made if a decrease in the fair value of equity method investments is other-than-temporary to determine if impairment loss should be recognized. Assessment of other-than-temporary impairment may involve significant management judgment, including, but not limited to, consideration of the investee’s current and projected financial condition and earnings, business prospects and creditworthiness; significant and prolonged decline in traded price of the investee’s equity security; or the Company's ability and intent to hold the investment until recovery of its carrying value. If management is unable to reasonably assert that an impairment is temporary or believes that the Company may not fully recover the carrying value of its investment, then the impairment is considered to be other-than-temporary.

Refer to Note 6 of the consolidated financial statements for a discussion of impairment recorded on equity method investments, including assessment of other-than-temporary impairment of our investment in CLNC, and methodology and inputs applied in estimating the fair value of impaired equity method investments.

Goodwill

The Company's goodwill is associated with its investment management and digital operating real estate businesses.

Goodwill is tested for impairment at the reporting unit to which it is assigned, which can be an operating segment or one level below an operating segment. The assessment of goodwill for impairment may initially be performed based on qualitative factors to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying value, including goodwill. If so, a quantitative assessment is performed, and to the extent the carrying value of the reporting unit exceeds its fair value, impairment is recognized for the excess up to the amount of goodwill assigned to the reporting unit. Alternatively, the Company may bypass a qualitative assessment and proceed directly to a quantitative assessment.

A qualitative assessment considers various factors such as macroeconomic, industry and market conditions to the extent they affect the earnings performance of the reporting unit, changes in business strategy and/or management of the reporting unit, changes in composition or mix of revenues and/or cost structure of the reporting unit, financial performance and business prospects of the reporting unit, among other factors.

In a quantitative assessment, significant judgment, assumptions and estimates are applied in determining the fair value of reporting units. The Company generally uses the income approach to estimate fair value by discounting the projected net cash flows of the reporting unit, and may corroborate with market-based data where available and appropriate. Projection of future cash flows is based upon various factors, including, but not limited to, our strategic plans in regard to our business and operations, internal forecasts, terminal year residual revenue multiples, operating profit margins, pricing of similar businesses and comparable transactions where applicable, and risk-adjusted discount rates to

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present value future cash flows. Given the level of sensitivity in the inputs, a change in the value of any one input, in isolation or in combination, could significantly affect the overall estimation of fair value of the reporting unit.

Refer to Note 7 of the consolidated financial statements for a discussion of impairment recorded on the Other IM goodwill, including triggering events, and methodology and inputs applied in estimating fair value of the Other IM reporting unit.

Fair Value

The Company carries certain assets at fair value on a recurring basis or at the time of initial acquisition. The Company has elected the fair value option for all loans receivable effective January 1, 2020. In a business combination or asset acquisition, all assets acquired and liabilities assumed are initially measured at fair value upon acquisition.

Loans Receivable

We typically classify loans receivable under Level 3 of the fair value hierarchy, with the measurement of fair value using at least one unobservable input that is significant and requiring management judgment. Level 3 fair value for loans receivable are generally estimated based upon the income approach, applying a discounted cash flow model. This involves a projection of principal and interest that are expected to be collected, and includes consideration of factors such as the financial standing and credit risk of the borrower or sponsor, operating results and/or value of the underlying collateral, and market yields for loans with similar credit risk and other characteristics. In times of adverse economic conditions, the judgment applied in estimating unobservable inputs is subject to a greater degree of uncertainty.

Refer to Note 12 of the consolidated financial statements for additional information on the inputs applied in estimating fair value of loans receivable.

Allocation of Purchase Consideration

In a business combination, the Company measures the assets acquired, liabilities assumed and any noncontrolling interests of the acquiree at their acquisition date fair values, with the excess of purchase consideration over the fair value of net assets acquired and the fair value of any previously held interest in the acquiree, recognized as goodwill. In an asset acquisition, the Company allocates the purchase consideration to the assets acquired and liabilities assumed based upon their relative fair values, which does not give rise to goodwill.

The estimation of fair value of the assets acquired and liabilities assumed involves significant judgment and assumptions. Acquired assets are generally composed of real estate, lease right-of-use ("ROU") asset, lease-related intangibles, investment management related intangibles, and other identifiable intangibles such as customer contracts, customer relationships and trade names. The Company generally values real estate based upon their replacement cost for buildings (in an as-vacant state), improvements and data center infrastructure, and based upon comparable sales or current listings for land. Lease ROU assets are measured based upon future lease payments over the lease term, adjusted for any lease incentives and capitalized direct leasing costs, and discounted at the incremental borrowing rate. Identifiable intangible assets are typically valued using the income approach based upon net cash flows expected to be generated by the assets, discounted to present value. Estimates applied include, but are not limited to: (i) construction costs for buildings and improvements; (ii) cost per kilowatt and costs of design, engineering, construction and installation for data center infrastructure; and (iii) for intangible assets, expected future cash flows, reinvestment rates by existing investors in our investment management business, lease renewal rates, customer attrition rates, discount rates, and useful lives. These estimates are based upon assumptions that management believes a market participant would apply in valuing the assets. These estimates and assumptions are forward-looking and are subject to uncertainties in future economic, market and industry conditions.

Refer to Note 3 of the consolidated financial statements for additional discussion of the methodology and inputs applied in estimating fair value of assets upon acquisition.

Recent Accounting Updates

The effects of accounting standards adopted in 2020 and the potential effects of accounting standards to be adopted in the future are described in Note 2 to our consolidated financial statements in Item 15. "Exhibits, Financial Statement Schedules" of this Annual Report.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Market risk includes the exposure to loss resulting from changes in interest rates, credit curve spreads, foreign currency exchange rates, commodity prices, equity prices and credit risk in our underlying investments.

Credit Risk

We are subject to the credit risk of the tenant/operators of our properties. We seek to undertake a rigorous credit evaluation of each tenant and operator prior to acquiring properties. This analysis includes an extensive due diligence investigation of the tenant/operator’s business as well as an assessment of the strategic importance of the underlying real estate to the tenant/operator’s core business operations. Where appropriate, we may seek to augment the tenant/operator’s commitment to the facility by structuring various credit enhancement mechanisms into their management assessments, where applicable, and underlying leases. These mechanisms could include security deposit requirements or guarantees from entities we deem creditworthy.

In addition, our investment in loans receivable is subject to a high degree of credit risk through exposure to loss from loan defaults. Default rates are subject to a wide variety of factors, including, but not limited to, borrower financial condition, property performance, property management, supply/demand factors, construction trends, consumer behavior, regional economics, interest rates, the strength of the U.S. economy and other factors beyond our control. All loans are subject to a certain probability of default. We manage credit risk through the underwriting process, acquiring our investments at the appropriate discount to face value, if any, and establishing loss assumptions. We also carefully monitor the performance of the loans, including those held through our joint venture investments, as well as external factors that may affect their value.

Interest Rate and Credit Curve Spread Risk

Interest rate risk relates to the risk that the future cash flow of a financial instrument will fluctuate because of changes in market interest rates. Interest rate risk is highly sensitive to many factors, including governmental, monetary and tax policies, domestic and international economic and political considerations and other factors beyond our control. Credit curve spread risk is highly sensitive to the dynamics of the markets for loans and securities we hold. Excessive supply of these assets combined with reduced demand will cause the market to require a higher yield. This demand for higher yield will cause the market to use a higher spread over the U.S. Treasury securities yield curve, or other benchmark interest rates, to value these assets.

As U.S. Treasury securities are priced to a higher yield and/or the spread to U.S. Treasuries used to price the assets increases, the price at which we could sell some of our fixed rate financial assets may decline. Conversely, as U.S. Treasury securities are priced to a lower yield and/or the spread to U.S. Treasuries used to price the assets decreases, the value of our fixed rate financial assets may increase. Fluctuations in LIBOR and/or any alternative reference rate may affect the amount of interest income we earn on our floating rate borrowings and interest expense we incur on borrowings indexed to such reference rate, including under credit facilities and investment-level financing.

We utilize a variety of financial instruments on some of our investments, including interest rate swaps, caps, floors and other interest rate exchange contracts, in order to limit the effects of fluctuations in interest rates on our operations. The use of these types of derivatives to hedge interest-earning assets and/or interest-bearing liabilities carries certain risks, including the risk that losses on a hedge position will reduce the funds available for distribution and that such losses may exceed the amount invested in such instruments. A hedge may not perform its intended purpose of offsetting losses of rising interest rates. Moreover, with respect to certain of the instruments used as hedges, we are exposed to the risk that the counterparties with which we trade may cease making markets and quoting prices in such instruments, which may render us unable to enter into an offsetting transaction with respect to an open position. If we anticipate that the income from any such hedging transaction will not be qualifying income for REIT income purposes, we may conduct all or part of our hedging activities through a to-be-formed corporate subsidiary that is fully subject to federal corporate income taxation. Our profitability may be adversely affected during any period as a result of changing interest rates.

We have financing arrangements with various financial institutions bearing variable rate interest indexed primarily to 1 and 3-month LIBOR and 1 and 3-month Euribor. We limit our exposure to interest rate increases for our debt primarily through the use of interest rate caps. The interest rate sensitivity table below illustrates the hypothetical impact of changes in the index rates in 1% increments on our interest expense in a one year period, assuming no changes in our debt principal as it stood at December 31, 2020, and taking into account the effects of interest rate caps and contractual floors

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on indices. The maximum decrease in the interest rates is assumed to be the actual applicable indices at December 31, 2020, all of which were under 1% at December 31, 2020.


($ in thousands)	+2.00%		+1.00%		Maximum Decrease in Applicable Index
Increase (decrease) in interest expense	$	157,697	$	80,137	$	(8,358)
Amount attributable to noncontrolling interests in investment entities	49,572		25,064		(1,620)
Amount attributable to Operating Company	$	108,125	$	55,073	$	(6,738)

Foreign Currency Risk

We have foreign currency rate exposures related to our foreign currency-denominated investments held predominantly by our foreign subsidiaries and to a lesser extent, by U.S. subsidiaries. Changes in foreign currency rates can adversely affect the fair values and earnings of our non-U.S. holdings. We generally mitigate this foreign currency risk by utilizing currency instruments to hedge our net investments in our foreign subsidiaries. We had previously employed forwards and costless collars (buying a protective put while writing an out-of-the-money covered call with a strike price at which the premium received is equal to the premium of the protective put purchased) which involved no initial capital outlay as hedging instruments on our foreign subsidiary investments. During the second quarter of 2020, we settled all our outstanding foreign currency hedges and replaced them with put options purchased through upfront premiums.

At December 31, 2020, we had approximately €455.4 million and £286.3 million or a total of $0.9 billion, in net investments in our European subsidiaries. A 1% change in these foreign currency rates would result in a $8.8 million increase or decrease in translation gain or loss included in other comprehensive income in connection with investments in our European subsidiaries, and a $0.6 million gain or loss in earnings in connection with GBP denominated loans receivable held by U.S subsidiaries.

A summary of the foreign exchange contracts in place at December 31, 2020, including notional amounts and key terms, is included in Note 11 to the consolidated financial statements. The maturity dates of these instruments approximate the projected dates of related cash flows for specific investments. Termination or maturity of currency hedging instruments may result in an obligation for payment to or from the counterparty to the hedging agreement. We are exposed to credit loss in the event of non-performance by counterparties for these contracts. To manage this risk, we select major international banks and financial institutions as counterparties and perform a quarterly review of the financial health and stability of our trading counterparties. Based on our review at December 31, 2020, we do not expect any counterparty to default on its obligations.

Commodity Price Risk

Certain operating costs in our data center portfolio are subject to price fluctuations caused by volatility of underlying commodity prices, primarily electricity used in our data center operations. We closely monitor the cost of electricity at all of our locations and may enter into power utility contracts to purchase electricity at fixed prices in certain locations in the U.S., with such contracts generally representing less than our forecasted usage. Our building of new data centers and expansion of existing data centers will also subject us to commodity price risk with respect to building materials such as steel and copper. Additionally, the lead time to procure data center equipment is substantial and procurement delays could increase construction cost and delay revenue generation.

Item 8. Financial Statements.

The financial statements and the supplementary financial data required by this item appear in Item 6. "Selected Financial Data" and Item 15. "Exhibits and Financial Statement Schedules" of this Annual Report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None

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Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) that are designed to ensure that information required to be disclosed in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

As required by Rule 13a-15(b) of the Exchange Act, we have evaluated, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at December 31, 2020.

Changes in Internal Control over Financial Reporting

Except as set forth below, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We completed our evaluation of the policies, processes, systems and operations of DataBank, which was acquired in December 2019. Our evaluation is ongoing for Vantage SDC, which was acquired in July 2020, and zColo, which was acquired by DataBank in December 2020. As of and for the year ended December 31, 2020, Vantage SDC and zColo each represented 18.1% and 8.2% of total assets, respectively, 17.2% and 7.4% of total liabilities, respectively, and 10.0% and 1.0% of total revenues, respectively.

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in 13a-15(f) and 15d-15(f) of the Exchange Act). Our internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of assets that could have a material effect on our financial statements.

Management evaluated the effectiveness of our internal control over financial reporting using the criteria set forth in the Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). As permitted by the SEC, management has elected to exclude Vantage SDC and zColo from its assessment of the effectiveness of our internal control over financial reporting. As of and for the year ended December 31, 2020, Vantage SDC and zColo each represented $3.7 billion and $1.7 billion of total assets, respectively, $2.2 billion and $1.0 billion of total liabilities, respectively, and $124.2 million and $12.6 million of total revenues, respectively. Based on our evaluation, except as it relates to Vantage SDC and zColo, management concluded that our internal control over financial reporting was effective as of December 31, 2020. We are in the process of integrating the policies, processes, systems and operations of Vantage SDC and zColo into our internal control over financial reporting.

Our internal control system was designed to provide reasonable assurance to management and our board of directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Ernst & Young LLP, an independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of December 31, 2020, as stated in their attestation report, which is included herein.

______________________________

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Colony Capital, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Colony Capital, Inc.’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework) (the COSO criteria). In our opinion, Colony Capital, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.

As indicated in the accompanying Management’s Annual Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Vantage Data Centers’ Portfolio of 12 hyperscale data centers (Vantage SDC) and Zayo Group Holdings, Inc.’s zColo assets (zColo), which are included in the 2020 consolidated financial statements of the Company and constituted $3.7 billion and $1.7 billion of total assets, respectively, $2.2 billion and $1.0 billion of total liabilities, respectively, as of December 31, 2020 and $124.2 million and $12.6 million of revenues, respectively, for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Vantage SDC and zColo.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and schedules, and our report dated March 1, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become

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inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Los Angeles, California

March 1, 2021

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Item 9B. Other Information.

New Board Appointment

On February 23, 2021, the Company’s board of directors (the “Board”) elected J. Braxton Carter to serve as an independent member of the Board, effective March 2, 2021. Concurrently with the foregoing Board appointment, the Board determined to increase the size of the Board to twelve (12) directors, effective March 2, 2021; however, the Board remains committed to reducing the Board size to no more than ten (10) members by the Company’s 2021 annual meeting of stockholders.

For nearly a decade until his retirement on July 1, 2020, Mr. Carter, age 62, served as Executive Vice President and Chief Financial Officer of T-Mobile US, Inc. (NASDAQ: TMUS), where he was responsible for leading its financial functions. Mr. Carter served as MetroPCS Communications, Inc.’s Chief Financial Officer from March 2005 until the combination of MetroPCS Communications, Inc. and T-Mobile USA completed in 2013 (the “Metro Combination”). Mr. Carter also served as MetroPCS Communications Inc.’s Vice Chairman from May 2011 until the consummation of the Metro Combination. From February 2001 to March 2005, he was Vice President, Corporate Operations of MetroPCS Communications, Inc. Mr. Carter also has extensive senior management experience in the wireless and retail industry and spent 10 years in public accounting. Since July 2020, he has served as a member of the board of directors of Assurant Inc (NYSE: AIZ). Mr. Carter is a certified public accountant. Mr. Carter holds a Bachelor of Science degree from the University of Colorado with a major in accounting.

Mr. Carter has been selected as a Board member because of his substantial financial expertise, coupled with his extensive experience as an executive, in the telecommunications and technology industries during the course of his career.

In accordance with the Company’s non-employee director compensation policy as described in the Company’s definitive proxy statement on Schedule 14A filed on April 1, 2020 with the Securities and Exchange Commission, Mr. Carter’s compensation for his services as a non-employee director will be consistent with that of the Company’s other non-employee directors, subject to proration to reflect the commencement date of his service on the Board. Mr. Carter is not a party to any transaction that would require disclosure under Item 404(a) of Regulation S-K.

Hospitality Sale Purchase Agreement Amendment

On February 28, 2021, the CLNY Seller Entities (as defined below), each affiliates of Colony Capital, Inc. (the “Company”), entered into a second amendment (the “Amendment”) to the Agreement of Purchase and Sale, dated September 22, 2020 (as amended from time to time, the “Sale Agreement”) with Silverplate Capital Partners LLC, a Delaware limited liability company and an affiliate of Highgate (the “Purchaser”), pursuant to which the CLNY Seller Entities agreed to sell all of the CLNY Seller Entities’ interests (the “Hospitality Interests”) in six of the Company’s hospitality portfolios, consisting of 22,676 rooms across 197 hotel properties in the U.S. The Amendment provides the Purchaser with a one-time right to extend the closing date of the transaction to March 31, 2021, if the Purchaser provides timely notice and deposits $10.0 million into escrow (which is in addition to the Purchaser’s initial $5 million deposit made at the signing of the Sale Agreement) on or before March 15, 2021. The Amendment further provides that each of the CLNY Seller Entities and the Purchaser has the right to further extend the closing date to April 15, 2021 if the party exercising the extension has a reasonable and good faith belief that certain third party consents are reasonably likely to be obtained by April 15, 2021.

In addition, the Amendment provides that the CLNY Seller Entities will receive certain purchase price credits for all or a portion of certain payments that the CLNY Seller Entities or its affiliates have made, or may make between the date of the Amendment and the closing date, with respect to the hospitality portfolios held through the Hospitality Interests.

The sale of the Hospitality Interests is expected to close in the first half of 2021; however, there can be no assurance that the sale will close in the timeframe contemplated or on the terms anticipated, if at all.

CMP I Owner-T, LLC, a Delaware limited liability company, CMP I CAM2-T, LLC, a Delaware limited liability company, Grand Prix Mezz Borrower Fixed LLC, a Delaware limited liability company, INK Acquisition LLC, a Delaware limited liability company, INK Acquisition III LLC, a Delaware limited liability company, Castleblack Owner Holdings, LLC, a Delaware limited liability company, Castleblack Operator Holdings, LLC, a Delaware limited liability company, MC Owner MB1-T, LLC, a Delaware limited liability company, MC OPS MB1-T, LLC, a Delaware limited liability company, NEP OPS MB2-T, LLC, a Delaware limited liability company, CNI THL Propco Holdings, LLC, a Delaware limited liability company, and CNI THL Opco Holdings, LLC, a Delaware limited liability company, are collectively referred to herein as the “CLNY Seller Entities.”

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The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Amendment, a copy of which is attached to this Annual Report on Form 10-K as Exhibit 10.55.

Material U.S. Federal Income Tax Considerations

The following is a discussion of certain material U.S. federal income tax considerations relating to our qualification and taxation as a real estate investment trust, which we refer to as a REIT, and the acquisition, holding, and disposition of our class A common stock, preferred stock, and depositary shares (for purposes of this section only, collectively referred to as “stock”). As used in this section, references to the terms “Company,” “we,” “our,” and “us” mean only Colony Capital, Inc. and not its subsidiaries or other lower-tier entities, except as otherwise indicated. This summary is based upon the Internal Revenue Code of 1986, as amended, which we refer to as the Code, the regulations promulgated by the U.S. Treasury Department, which we refer to as the Treasury Regulations, rulings and other administrative interpretations and practices of the Internal Revenue Service, which we refer to as the IRS (including administrative interpretations and practices expressed in private letter rulings which are binding on the IRS only with respect to the particular taxpayers who requested and received those rulings), and judicial decisions, all as currently in effect, and all of which are subject to differing interpretations or to change, possibly with retroactive effect. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below. We have not sought and will not seek an advance ruling from the IRS regarding any matter discussed in this section. The summary is also based upon the assumption that we have operated and will operate the Company and its subsidiaries and affiliated entities in accordance with their applicable organizational documents. This summary is for general information only, and does not purport to discuss all aspects of U.S. federal income taxation that may be important to a particular investor in light of its investment or tax circumstances, or to investors subject to special tax rules, including:

•insurance companies;

•tax-exempt organizations (except to the extent discussed in “—Taxation of Tax—Exempt Stockholders” below);

•financial institutions or broker-dealers;

•non-U.S. individuals and foreign corporations (except to the extent discussed in “—Taxation of Non-U.S. Stockholders” below);

•U.S. expatriates;

•persons who mark-to-market our stock;

•subchapter S corporations;

•U.S. stockholders, as defined below, whose functional currency is not the U.S. dollar;

•regulated investment companies;

•REITs;

•trusts and estates;

•holders who receive our stock through the exercise of employee stock options or otherwise as compensation;

•persons holding our stock as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security” or other integrated investment;

•persons subject to the alternative minimum tax provisions of the Code;

•persons holding our stock through a partnership or similar pass-through entity; and

•persons holding a 10% or more (by vote or value) beneficial interest in our stock.

This summary assumes that stockholders hold shares of our stock as capital assets for U.S. federal income tax purposes, which generally means property held for investment.

The statements in this section are based on the current U.S. federal income tax laws, are for general information purposes only and are not tax advice. We cannot assure you that new laws, interpretations of law or court decisions, any of which may take effect retroactively, will not cause any statement in this section to be inaccurate.

THE U.S. FEDERAL INCOME TAX TREATMENT OF US AS A REIT AND OF YOU AS A HOLDER OF OUR STOCK DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF COMPLEX PROVISIONS OF U.S. FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR AUTHORITY MAY

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BE AVAILABLE. IN ADDITION, THE TAX CONSEQUENCES TO ANY PARTICULAR HOLDER OF OUR STOCK WILL DEPEND ON SUCH HOLDER’S PARTICULAR TAX CIRCUMSTANCES.

YOU SHOULD CONSULT YOUR TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO YOU OF THE OWNERSHIP AND SALE OF OUR STOCK AND OF ITS INTENDED ELECTION TO BE TAXED AS A REIT. SPECIFICALLY, YOU SHOULD CONSULT YOUR TAX ADVISOR REGARDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH OWNERSHIP, SALE AND ELECTION, AND REGARDING POTENTIAL CHANGES IN APPLICABLE TAX LAWS.

Taxation of Colony Capital

We elected to be taxed as a REIT under the U.S. federal income tax laws commencing with our taxable year ended December 31, 2017. We believe that we are organized and have operated, and we intend to continue to operate, in a manner so as to qualify for taxation as a REIT under the Code. This section discusses the laws governing the U.S. federal income tax treatment of a REIT and its stockholders. These laws are highly technical and complex.

Qualification and taxation as a REIT depends on our ability to meet on a continuing basis, through actual operating results, distribution levels, and diversity of ownership by holders of our securities and asset ownership, and various other qualification requirements imposed upon REITs by the Code. In addition, our ability to qualify as a REIT may depend in part upon the operating results, organizational structure and entity classification for U.S. federal income tax purposes of certain entities in which we invest. Our ability to qualify as a REIT also requires that we satisfy certain asset tests, some of which depend upon the fair market values of assets that we own directly or indirectly. Such values may not be susceptible to a precise determination, whether for past, current, or future periods, and based upon the types of assets that we own and intend to own, such values can vary rapidly, significantly and unpredictably. Accordingly, no assurance can be given that the actual results of our operations for any taxable year will satisfy such requirements for qualification and taxation as a REIT. Similarly, the income we earn from our assets may not be earned when or in the proportions anticipated. For example, we may encounter situations in which a relatively small investment generates a higher than expected return in a particular year (or vice versa). A discussion of the tax consequences of the failure to qualify as a REIT and certain alternatives is included below in the section entitled “—Failure to Qualify.”

As indicated above, our qualification and taxation as a REIT depends upon our ability to meet, on a continuing basis, various qualification requirements imposed upon REITs by the Code. The material qualification requirements are summarized below under “—Requirements for Qualification.” While we intend to operate so that we qualify as a REIT, no assurance can be given that the IRS will not challenge our qualification, or that we have been or will be able to operate in accordance with the REIT requirements in the future. See “—Requirements for Qualification—Failure to Qualify.”

The CARES Act

The Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") (P.L. 116-136) that was signed into law on March 27, 2020 includes several significant tax provisions. These changes include:

•the elimination of the taxable income limit for net operating losses ("NOLs") for all taxable years beginning after December 31, 2017 and before January 1, 2021, thereby permitting corporate taxpayers to use NOLs to fully offset taxable income (although as a REIT, we will continue to only be able to use NOLs against taxable income remaining after taking into account any dividends-paid deduction);

•allowing our TRSs to carry back NOLs arising in 2018, 2019, and 2020 to the five taxable years preceding the taxable year of the loss;

•an increase to the business interest limitation under Section 163(j) of the Code, from 30 percent to 50 percent for taxable years 2019 and 2020 and the addition of an election by taxpayers to use their 2019 adjusted taxable income as their adjusted taxable income in 2020 for purposes of applying the limitation; and

•a "technical correction" amending Section 168(e)(3)(E) of the Code to add "qualified improvement property" to "15-year property" and assigning a class life of 20 years under Section 168(g)(3)(B) of the Code to qualified improvement property under Section 168(e)(3)(E)(vii) of the Code.

Tax Reform Legislation Enacted December 22, 2017

On December 22, 2017, the President signed into law H.R. 1, which generally took effect for taxable years beginning on or after January 1, 2018. This legislation made many changes to the U.S. federal income tax laws that significantly impact the taxation of individuals, corporations (both non-REIT C corporations as well as corporations that have elected to be taxed as REITs), and the taxation of taxpayers with overseas assets and operations. These changes are generally effective for taxable years beginning after December 31, 2017. However, a number of changes that reduce the tax rates

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applicable to non-corporate taxpayers (including a new 20% deduction for qualified REIT dividends that reduces the effective rate of regular income tax on such income), and also limit the ability of such taxpayers to claim certain deductions, will expire for taxable years beginning after 2025, unless Congress acts to extend them.

These changes impact us and our stockholders in various ways, some of which are adverse relative to prior law, and this summary of material U.S. federal income tax considerations incorporates these changes where material. To date, the IRS has issued only some guidance with respect to certain provisions of H.R. 1. There are numerous interpretive issues and ambiguities that still require guidance and that are not clearly addressed in the legislative history that accompanied H.R. 1 and additional technical corrections legislation is still needed to clarify certain of the new provisions and give proper effect to Congressional intent. There can be no assurance, however, that technical clarifications or other legislative changes that may be needed to prevent unintended or unforeseen tax consequences will be enacted by Congress anytime soon.

Taxation of REITs in General

Provided that we qualify as a REIT, we will be entitled at the REIT level to a deduction from our taxable income for dividends that we pay and, therefore, will not be subject to U.S. federal corporate income tax at the REIT level on our taxable income that is currently distributed to holders of our securities. This treatment substantially eliminates the “double taxation” at the corporate and stockholder levels that generally results from an investment in a non-REIT C corporation. A non-REIT C corporation is a corporation that generally is required to pay tax at the corporate level. Double taxation means taxation once at the corporate level when income is earned and once again at the stockholder level when the income is distributed. In general, the income that we generate is taxed only at the stockholder level upon a distribution of dividends to our stockholders.

U.S. stockholders generally will be subject to taxation on dividends distributed by us (other than designated capital gain dividends and “qualified dividend income”) at rates applicable to ordinary income, instead of at lower capital gain rates. For taxable years beginning after December 31, 2017, and before January 1, 2026, generally, U.S. stockholders that are individuals, trusts or estates may deduct 20% of the aggregate amount of ordinary dividends distributed by us, subject to certain limitations. Capital gain dividends and qualified dividend income will continue to be subject to a maximum 20% rate. See “—Taxation of Taxable U.S. Stockholders of Colony Capital—Taxation of U.S. Stockholders on Distributions of Our Stock.”

Any net operating losses, foreign tax credits and other tax attributes of a REIT generally do not pass through to holders of our securities, subject to special rules for certain items such as the capital gains that we recognize. See “—Taxation of Taxable U.S. Stockholders of Colony Capital.”

Even if the Company qualifies for taxation as a REIT, the Company will be subject to U.S. federal tax in the following circumstances:

•the Company will pay U.S. federal income tax on any taxable income, including net capital gain, that it does not distribute to stockholders during, or within a specified time period after, the calendar year in which the income is earned.

•for our taxable year ended December 31, 2017, the Company may be subject to the “alternative minimum tax” on any items of tax preference that it does not distribute or allocate to stockholders.

•the Company will pay income tax at the highest corporate rate on:

•net income from the sale or other disposition of property acquired through foreclosure, or foreclosure property, that it holds primarily for sale to customers in the ordinary course of business; and

•other non-qualifying income from foreclosure property.

•the Company will pay a 100% tax on net income earned from sales or other dispositions of property, other than foreclosure property, by an entity other than a taxable REIT subsidiary, which we refer to as a TRS, if such property is held primarily for sale to customers in the ordinary course of business.

•if the Company fails to satisfy one or both of the 75% gross income test or the 95% gross income test, as described below in the section entitled “—Requirements for Qualification—Gross Income Tests,” and nonetheless continues to qualify as a REIT because it meets other requirements, it will pay a 100% tax on: the greater of the amount by which it fails the 75% gross income test or the 95% gross income test, multiplied, in either case, by a fraction intended to reflect its profitability.

•if the Company fails any of the asset tests (other than a de minimis failure of the 5% asset test or the 10% vote or value test, as described below in the section entitled “—Requirements for Qualification—Asset Tests”), as long as

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the failure was due to reasonable cause and not to willful neglect, the Company files a description of each asset that caused such failure with the IRS, and the Company disposes of the assets or otherwise complies with the asset tests within six months after the last day of the quarter in which it identifies such failure, it will pay a tax equal to the greater of $50,000 or the highest U.S. federal income tax rate then applicable to U.S. corporations (currently 21%) on the net income from the non-qualifying assets during the period in which it failed to satisfy the asset tests in order to remain qualified as a REIT.

•if the Company fails to satisfy one or more requirements for REIT qualification, other than the gross income tests and the asset tests, and such failure is due to reasonable cause and not to willful neglect, it will be required to pay a penalty of $50,000 for each such failure in order to remain qualified as a REIT.

•if the Company fails to distribute during a calendar year at least the sum of: (i) 85% of its REIT ordinary income for the year; (ii) 95% of its REIT capital gain net income for the year; and (iii) any undistributed taxable income required to be distributed from earlier periods, the Company will pay a 4% nondeductible excise tax on the excess of the required distribution over the amount it actually distributed, plus any retained amounts on which income tax has been paid at the corporate level.

•the Company may elect to retain and pay income tax on its net long-term capital gain. In that case, to the extent that the Company made a timely designation of such gain, a U.S. stockholder would be taxed on its proportionate share of the Company’s undistributed long-term capital gain and would receive a credit or refund for its proportionate share of the tax the Company paid.

•the Company will be subject to a 100% excise tax on transactions with a TRS that are not conducted on an arm’s-length basis.

•if the Company acquires any asset from a non-REIT C corporation in a merger or other transaction in which the Company acquires a basis in the asset that is determined by reference either to the non-REIT C corporation’s basis in the asset or to another asset, the Company will pay tax at the highest regular corporate rate applicable if it recognizes gain on the sale or disposition of the asset during the five-year period after it acquires the asset, provided no election is made for the transaction to be taxable on a current basis. This tax will generally apply to gain recognized with respect to assets that the Company holds as of the effective date of its REIT election (January 1, 2017) if such gain is recognized during the five-year period following such effective date or it may apply if the Company were to engage in (or, potentially, become a successor to an entity that had engaged in) a tax-free spin-off transaction under Section 355 of the Code within 5 years of such effective date. The amount of gain on which the Company would pay tax in the foregoing circumstances is the lesser of:

•the amount of gain that the Company recognizes at the time of the sale or disposition (or would have recognized if, at the time of a spin-off transaction described above, the Company had disposed of the applicable asset); and

•the amount of gain that the Company would have recognized if it had sold the asset at the time the Company acquired it, assuming that the non-REIT C corporation will not elect in lieu of this treatment an immediate tax when the asset is acquired.

•the Company may be required to pay monetary penalties to the IRS in certain circumstances, including if it fails to meet recordkeeping requirements intended to monitor its compliance with rules relating to the composition of a REIT’s stockholders, as described below in the section entitled “—Requirements for Qualification—Recordkeeping Requirements.”

•the earnings of the Company’s lower-tier entities that are subchapter C corporations, excluding any qualified REIT subsidiaries, which we refer to as QRSs, but including domestic TRSs, are subject to U.S. federal corporate income tax.

In addition, the Company and its subsidiaries may be subject to a variety of taxes, including payroll taxes and state, local and foreign income, property and other taxes on its assets and operations. The Company could also be subject to tax in situations and on transactions not presently contemplated. Moreover, as described further below, the Company’s TRSs will be subject to U.S. federal, state and local corporate income tax on their taxable income. Due to the nature of the assets in which the Company invests, the Company’s TRSs have, and the Company expects the TRSs will continue to have, a material amount of assets and net taxable income.

Requirements for Qualification

A REIT is a corporation, trust or association that meets each of the following requirements:

1.It is managed by one or more trustees or directors.

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2.Its beneficial ownership is evidenced by transferable shares or by transferable certificates of beneficial interest.

3.It would be taxable as a domestic corporation but for the REIT provisions of the U.S. federal income tax laws.

4.It is neither a financial institution nor an insurance company subject to special provisions of the U.S. federal income tax laws.

5.At least 100 persons are beneficial owners of its shares or ownership certificates.

6.Not more than 50% in value of its outstanding shares or ownership certificates is owned, directly or indirectly, by five or fewer individuals, which the Code defines to include certain entities, during the last half of any taxable year.

7.It elects to be a REIT, or has made such election for a previous taxable year, and satisfies all relevant filing and other administrative requirements established by the IRS that must be met to elect and maintain REIT status.

8.It meets certain other qualification tests, described below, regarding the nature of its income and assets and the amount of its distributions to stockholders.

9.It uses a calendar year for U.S. federal income tax purposes.

The Company must meet requirements 1 through 4, 8 and 9 during its entire taxable year and must meet requirement 5 during at least 335 days of a taxable year of 12 months, or during a proportionate part of a taxable year of less than 12 months. Requirements 5 and 6 began applying to the Company with its 2018 taxable year. If the Company complies with all the requirements for ascertaining the ownership of its outstanding shares in a taxable year and has no reason to know that it violated requirement 6, it will be deemed to have satisfied requirement 6 for that taxable year. For purposes of determining share ownership under requirement 6, an “individual” generally includes a supplemental unemployment compensation benefits plan, a private foundation or a portion of a trust permanently set aside or used exclusively for charitable purposes. An “individual,” however, generally does not include a trust that is a qualified employee pension or profit-sharing trust under the U.S. federal income tax laws, and beneficiaries of such a trust will be treated as holding our stock in proportion to their actuarial interests in the trust for purposes of requirement 6. The Company expects to issue sufficient stock with sufficient diversity of ownership to satisfy requirements 5 and 6. In addition, the Company’s charter restricts the ownership and transfer of our stock so that it should continue to satisfy these requirements. To monitor compliance with the stock ownership requirements, we are generally required to maintain records regarding the actual ownership of our stock. To do so, we must demand written statements each year from the record holders of significant percentages of our stock pursuant to which the record holders must disclose the actual owners of the stock (i.e., the persons required to include in gross income the dividends paid by us). We must maintain a list of those persons failing or refusing to comply with this demand as part of our records. We could be subject to monetary penalties if we fail to comply with these recordkeeping requirements. A stockholder that fails or refuses to comply with the demand is required by Treasury Regulations to submit a statement with its tax return disclosing the actual ownership of our stock and other information. For purposes of requirement 9, we have adopted December 31 as our year end, and thereby satisfy this requirement.

Relief from Violations; Reasonable Cause

The Internal Revenue Code provides relief from violations of the REIT gross income requirements, as described below under “—Requirements for Qualification—Gross Income Tests,” in cases where a violation is due to reasonable cause and not to willful neglect, and other requirements are met, including the payment of a penalty tax that is based upon the magnitude of the violation. In addition, certain provisions of the Internal Revenue Code extend similar relief in the case of certain violations of the REIT asset requirements (see “—Requirements for Qualification—Asset Tests” below) and other REIT requirements, again provided that the violation is due to reasonable cause and not willful neglect, and other conditions are met, including the payment of a penalty tax. If we did not have reasonable cause for a failure, we would fail to qualify as a REIT. Whether we would have reasonable cause for any such failure cannot be known with certainty because the determination of whether reasonable cause exists depends on the facts and circumstances at the time and we cannot provide any assurance that we in fact would have reasonable cause for a particular failure or that the IRS would not successfully challenge our view that a failure was due to reasonable cause. Moreover, we may be unable to actually rectify a failure and restore asset test compliance within the required timeframe due to the inability to transfer or otherwise dispose of assets, including as a result of restrictions on transfer imposed by our lenders or undertakings with our co-investors and/or the inability to acquire additional qualifying assets due to transaction risks, access to additional capital or other considerations. If we fail to satisfy any of the various REIT requirements, there can be no assurance that these relief provisions would be available to enable us to maintain our qualification as a REIT, and, if such relief provisions are available, the amount of any resultant penalty tax could be substantial.

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Effect of Subsidiary Entities

Qualified REIT Subsidiaries. A corporation that is a QRS is not treated as a corporation separate from its parent REIT. All assets, liabilities and items of income, deduction and credit of a QRS are treated as assets, liabilities and items of income, deduction and credit of the REIT. A QRS is a corporation, other than a TRS, all the stock of which is owned by the REIT. Thus, in applying the requirements described herein, any QRS that the Company owns will be ignored, and all assets, liabilities and items of income, deduction and credit of such subsidiary will be treated as the Company’s assets, liabilities and items of income, deduction and credit.

Other Disregarded Entities and Partnerships. An unincorporated domestic entity, such as a partnership or limited liability company, that has a single owner for U.S. federal income tax purposes generally is not treated as an entity separate from its owner for U.S. federal income tax purposes. An unincorporated domestic entity with two or more owners is generally treated as a partnership for U.S. federal income tax purposes. In the case of a REIT that is a partner in a partnership that has other partners, the REIT is treated as owning its proportionate share of the assets of the partnership and as earning its allocable share of the gross income of the partnership for purposes of the applicable REIT qualification tests. Thus, the Company’s proportionate share of the assets, liabilities and items of income of Colony Capital Operating Company, LLC, which we refer to as the Operating Partnership, and any other partnership, joint venture or limited liability company that is treated as a partnership for U.S. federal income tax purposes in which it has acquired or will acquire an interest, directly or indirectly, or a subsidiary partnership, will be treated as its assets and gross income for purposes of applying the various REIT qualification requirements. For purposes of the 10% value test (described in the section entitled “—Asset Tests”), the Company’s proportionate share is based on its proportionate interest in the equity interests and certain debt securities issued by the partnership. For all of the other asset and income tests, the Company’s proportionate share is based on its proportionate interest in the capital of the partnership.

The Company holds and expects to acquire limited partner or non-managing member interests in partnerships and limited liability companies that are joint ventures or investment funds. If a partnership or limited liability company in which the Company owns a direct or indirect interest takes or expects to take actions that could jeopardize its qualification as a REIT or require it to pay tax, the Company may be forced to dispose of its interest in such entity. In addition, it is possible that a partnership or limited liability company could take an action which could cause the Company to fail a REIT gross income or asset test, and that the Company would not become aware of such action in time to dispose of its interest in the partnership or limited liability company or take other corrective action on a timely basis. In that case, the Company could fail to qualify as a REIT unless it was able to qualify for a statutory REIT “savings” provision, which may require it to pay a significant penalty tax to maintain its REIT qualification.

Taxable REIT Subsidiaries. A REIT may own up to 100% of the stock of one or more TRSs. A TRS is a fully taxable corporation that may earn income that would not be qualifying income if earned directly by its parent REIT or through a disregarded or partnership subsidiary. The subsidiary corporation and the REIT must jointly elect to treat the subsidiary as a TRS. Any corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS.

A REIT is not treated as holding the assets of a TRS or as receiving any income that the TRS earns. Rather, the stock issued by the TRS is an asset in the hands of the parent REIT and the REIT recognizes as income the dividends, if any, that it receives from the TRS. This treatment can affect the income and asset test calculations that apply to the REIT. Because a parent REIT does not include the assets and income of such TRSs in determining the parent REIT’s compliance with the REIT requirements, TRSs may be used by the parent REIT to undertake indirectly activities that the REIT rules might otherwise preclude it from doing directly or through pass-through subsidiaries (for example, activities that give rise to certain categories of income such as management fees).

However, an entity will not qualify as a TRS if it directly or indirectly operates or manages a lodging or health care facility or, generally, provides rights to any brand name under which any lodging or health care facility is operated, unless such rights are provided to an “eligible independent contractor” to operate or manage a lodging facility or a health care facility if such rights are held by the TRS as a franchisee, licensee or in a similar capacity and such lodging facility or health care facility is either owned by the TRS or leased to the TRS by its parent REIT. A TRS will not be considered to operate or manage a qualified lodging facility or a qualified health care property solely because the TRS directly or indirectly possesses a license, permit or similar instrument enabling it to do so. Additionally, a TRS will not be considered to operate or manage a qualified lodging facility or qualified health care property located outside of the United States, as long as an “eligible independent contractor” is responsible for the daily supervision and direction of such individuals on behalf of the TRS pursuant to a management agreement or similar service contract. An “eligible independent contractor” is, generally, with respect to any qualified lodging facility or qualified health care property, any independent contractor (as defined in Section 856(d)(3) of the Code) if, at the time such contractor enters into a management agreement or other similar service contract with the TRS to operate such qualified lodging facility or qualified health care property, such

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contractor (or any related person) is actively engaged in the trade or business of operating qualified lodging facilities or qualified health care properties, respectively, for any person who is not a related person with respect to the parent REIT or the TRS. The Company expects to acquire equity interests in health care properties and lodging facilities. The Company may lease qualified health care properties or qualified lodging facilities to a TRS of the Company, which TRS will, in turn, engage “eligible independent contractors” to operate such properties. We may also own health care properties or lodging facilities through a TRS, which would engage “eligible independent contractors” to operate such facilities. We have taken, and will continue to take, all steps reasonably practicable to ensure that no TRS will engage in “operating” or “managing” its health care properties or lodging facilities and that the management companies engaged to operate such health care properties or lodging facilities will qualify as “eligible independent contractors.”

Domestic TRSs are subject to U.S. federal income tax, and state and local income tax, where applicable, on their taxable income. To the extent that a domestic TRS is required to pay taxes, it will have less cash available for distribution to the Company. If dividends are paid to the Company by its domestic TRSs, then the dividends it pays to our stockholders who are taxed at individual rates, up to the amount of dividends it receives from its domestic TRSs, will generally be eligible to be taxed at the reduced 20% rate applicable to qualified dividend income.

The TRS rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. Further, the rules impose a 100% excise tax on transactions between a TRS and its parent REIT or the REIT’s tenants that are not conducted on an arm’s-length basis. See “—Interest Deduction Limitation Enacted by H.R. 1.”

We hold a significant amount of assets in one or more TRSs, and are subject to the limitation that securities in TRSs may not represent more than 20% (25% with respect our taxable year ended December 31, 2017) of the value of the Company’s total assets. There can be no assurance that we will be able to comply with the 20% or 25% limitations.

In general, the Company intends that any loans that are originated or acquired with an intention of selling such loans in a manner that might expose us to a 100% tax on “prohibited transactions” if originated or acquired by us directly, will instead be originated or acquired by a TRS. Refer to the section entitled “—Gross Income Tests—Prohibited Transactions.” It is possible that such a TRS through which sales of securities are made may be treated as a “dealer” for U.S. federal income tax purposes. As a dealer, a TRS would generally mark all the securities it holds on the last day of each taxable year to their market value, and will recognize ordinary income or loss on such securities with respect to such taxable year as if they had been sold for that value on that day. In addition, a TRS may further elect to be subject to the mark-to-market regime described above in the event that the TRS is properly classified as a “trader” as opposed to a “dealer” for U.S. federal income tax purposes.

We have made, and expect to continue to make, TRS elections with respect to certain foreign TRSs, including any issuers of collateralized debt obligations and other foreign TRSs. The Code and Treasury Regulations promulgated thereunder provide a specific exemption from U.S. federal income tax to non-U.S. corporations that restrict their activities in the United States to trading in stocks and securities (or any other activity closely related thereto) for their own account, whether such trading (or such other activity) is conducted by the corporation or its employees through a resident broker, commission agent, custodian or other agent. The Company’s foreign TRSs intend to rely on such exemption and do not intend to operate so as to be subject to U.S. federal income tax on their net income. Therefore, despite their status as TRSs, the Company’s foreign TRSs generally would not be subject to U.S. federal corporate income tax on their earnings. No assurance can be given, however, that the IRS will not challenge this treatment. If the IRS were to succeed in such a challenge, then it could greatly reduce the amounts that the Company’s foreign TRSs would have available to distribute to the Company and to pay to their creditors. Notwithstanding these rules, any gain recognized by a foreign corporation with respect to U.S. real property is subject to U.S. tax as if the foreign corporation were a U.S. taxpayer. It is not anticipated that our foreign TRSs will hold U.S. real property other than by foreclosure. Nevertheless, gain (if any) realized on foreclosed U.S. real property would be subject to U.S. tax.

Certain U.S. stockholders of certain non-U.S. corporations, such as the Company’s foreign TRSs, are required to include in their income currently their proportionate share of the earnings of such a corporation, whether or not such earnings are distributed. We generally will be required to include in income, on a current basis, the earnings of its foreign TRSs. For a discussion of the treatment of the income inclusions from the Company’s foreign TRSs under the gross income tests, refer to the section entitled “—Gross Income Tests.”

Subsidiary REITs. We own interests (directly or indirectly) in one or more entities that qualify as REITs. We believe that each such REIT has operated, and will continue to operate, in a manner to permit us to qualify for taxation as a REIT for U.S. federal income tax purposes and that stock in any such REIT will thus be a qualifying asset for purposes of the 75% asset test. However, if any such REIT fails to qualify as a REIT then (i) the entity would become subject to regular corporate income tax, as described herein (refer below to the section entitled “—Failure to Qualify”) and (ii) the Company’s equity interest in such entity would cease to be a qualifying real estate asset for purposes of the 75% asset test and, if our

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protective TRS elections were ineffective, would become subject to the 5% asset test and the 10% vote or value test generally applicable to the Company’s ownership in corporations other than REITs, QRSs or TRSs (refer below to the section entitled “—Asset Tests”). If such an entity failed to qualify as a REIT, it is possible that we would not meet the 75% asset test, the 5% asset test, and/or the 10% vote or value test with respect to its interest in such entity, in which event we would fail to qualify as a REIT, unless we qualify for certain relief provisions.

Taxable Mortgage Pools. An entity, or a portion of an entity, may be classified as a taxable mortgage pool, which we refer to as a TMP, under the Code if:

•substantially all of its assets consist of debt obligations or interests in debt obligations;

•more than 50% of those debt obligations are real estate mortgages or interests in real estate mortgages as of specified testing dates;

•the entity has issued debt obligations that have two or more maturities; and

•the payments required to be made by the entity on its debt obligations “bear a relationship” to the payments to be received by the entity on the debt obligations that it holds as assets.

Under the Treasury Regulations, if less than 80% of the assets of an entity (or a portion of an entity) consists of debt obligations, these debt obligations are considered not to comprise “substantially all” of its assets and therefore the entity would not be treated as a TMP. Financing arrangements entered into, directly or indirectly, by the Company may give rise to TMPs, with the consequences described in the next paragraph.

A TMP generally is treated as a corporation for U.S. federal income tax purposes. However, special rules apply to a REIT, a portion of a REIT, or a QRS that is a TMP. If a REIT owns directly, or indirectly through one or more QRSs or other entities that are disregarded as separate entities for U.S. federal income tax purposes, 100% of the equity interests in the TMP, the TMP will be a QRS and, therefore, ignored as an entity separate from the REIT for U.S. federal income tax purposes and would not generally affect the tax qualification of the REIT. It is possible that, based on future financing structures or investments, we would have a QRS that is a TMP or a subsidiary that is a REIT and a TMP or a separate corporation that is taxable as a corporation.

If the Company has an investment in an arrangement that is classified as a TMP, that TMP arrangement will be subject to tax as a separate corporation unless the Company owns 100% of the equity in such TMP arrangement so that it is treated as a QRS, as discussed above. Whether an arrangement is or is not a TMP may not be susceptible to precise determination. If an investment in which the Company owns an interest is characterized as a TMP and thus as a separate corporation, the Company will satisfy the 100% ownership requirement only so long as it owns all classes of securities that for tax purposes are characterized as equity, which is often an uncertain factual issue and in any event is unlikely in the Company’s case given that it expects to generally hold its assets through the Company’s Operating Partnership. Accordingly, if an investment in which the Company owns an interest is characterized as a TMP that does not qualify as a QRS, the Company may be unable to comply with the REIT asset tests that restrict its ability to own most corporations.

Tax-exempt investors, regulated investment company or REIT investors, non-U.S. investors and taxpayers with net operating losses should carefully consider the tax consequences described above, and are urged to consult their tax advisors.

Gross Income Tests

The Company must satisfy two gross income tests annually to qualify as a REIT. First, at least 75% of the Company’s gross income for each taxable year must consist of defined types of income that it derives, directly or indirectly, from investments relating to real property or mortgages on real property or qualified temporary investment income. Qualifying income for purposes of the 75% gross income test generally includes:

•rents from real property;

•interest on debt secured by mortgages on real property or on interests in real property;

•dividends or other distributions on, and gain from the sale of, shares in other REITs;

•gain from the sale of real estate assets;

•income and gain derived from foreclosure property;

•income derived from a REMIC in proportion to the real estate assets held by the REMIC, unless at least 95% of the REMIC’s assets are real estate assets, in which case all of the income derived from the REMIC; and

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•income derived from the temporary investment of new capital that is attributable to the issuance of our stock or a public offering of our debt with a maturity date of at least five years that is received during the one-year period beginning on the date on which we received such new capital.

Although a debt instrument issued by a “publicly offered REIT” (i.e., a REIT that is required to file annual and periodic reports with the SEC under the Exchange Act) is treated as a “real estate asset” for purposes of the asset tests, the interest income and gain from the sale of such debt instruments is not treated as qualifying income for the 75% gross income test unless the debt instrument is secured by real property or an interest in real property.

Second, in general, at least 95% of the Company’s gross income for each taxable year must consist of income that is qualifying income for purposes of the 75% gross income test, other types of interest and dividends, gain from the sale or disposition of stock or securities or any combination of these. For purposes of the 95% gross income test, gain from the sale of securities includes gain from the sale of a debt instrument issued by a “publicly offered REIT” even if not secured by real property or an interest in real property. Gross income from the sale of property that the Company holds primarily for sale to customers in the ordinary course of business and cancellation of indebtedness, which we refer to as COD, income is excluded from both the numerator and the denominator in both income tests. Income and gain from “qualified hedging transactions,” as defined below in “—Hedging Transactions,” that are clearly and timely identified as such are excluded from both the numerator and the denominator for purposes of the 75% and 95% gross income tests. In addition, certain foreign currency gains are excluded from gross income for purposes of one or both of the gross income tests. Refer below to the section entitled “—Foreign Currency Gain.” The following paragraphs discuss the specific application of the gross income tests to the Company.

Rents from Real Property

Rent that the Company receives from its real property will qualify as “rents from real property” which is qualifying income for purposes of the 75% and 95% gross income tests, only if the following conditions are met:

•First, the rent must not be based, in whole or in part, on the income or profits of any person. However, an amount received or accrued generally will not be excluded from rents from real property solely by reason of being based on fixed percentages of receipts or sales.

•Second, rents the Company receives from a “related party tenant” will not qualify as rents from real property in satisfying the gross income tests unless the tenant is a TRS, and either: (i) at least 90% of the property is leased to unrelated tenants and the rent paid by the TRS is substantially comparable to

•the rent paid by the unrelated tenants for comparable space; or (ii) the TRS leases a qualified lodging facility or qualified health care property and engages an eligible independent contractor, as defined above in “—Taxable REIT Subsidiaries,” to operate such facility or property on its behalf. A tenant is a related party tenant if the REIT, or an actual or constructive owner of 10% or more of the REIT, actually or constructively owns 10% or more of the tenant.

•Third, if rent attributable to personal property leased in connection with a lease of real property is 15% or less of the total rent received under the lease, then the rent attributable to personal property will qualify as rents from real property. However, if the 15% threshold is exceeded, the rent attributable to personal property will not qualify as rents from real property.

•Fourth, the Company generally must not operate or manage its real property or furnish or render services to its tenants, other than through an “independent contractor” who is adequately compensated and from whom the Company does not derive revenue. However, the Company may provide services directly to tenants if the services are “usually or customarily rendered” in connection with the rental of space for occupancy only and are not considered to be provided for the tenants’ convenience. In addition, the Company may provide a minimal amount of “noncustomary” services to the tenants of a property, other than through an independent contractor, as long as its income from the services (valued at not less than 150% of the Company’s direct cost of performing such services) does not exceed 1% of its income from the related property. Furthermore, the Company may own up to 100% of the stock of a TRS which may provide customary and noncustomary services to its tenants without tainting the rental income for the related properties. Refer to the section entitled “—Taxable REIT Subsidiaries.”

Unless the Company determines that the resulting non-qualifying income under any of the following circumstances, taken together with all other non-qualifying income earned by it in the taxable year, will not jeopardize its qualification as a REIT, the Company does not intend to:

•derive rental income attributable to personal property other than personal property leased in connection with the lease of real property, the amount of which is less than 15% of the total rent received under the lease;

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•rent any property to a related party tenant, including, except with respect to qualified health care properties and qualified lodging facilities, a TRS;

•charge rent for any property that is based in whole or in part on the income or profits of any person, except by reason of being based on a fixed percentage or percentages of receipts or sales, as described above; or

•directly perform services considered to be noncustomary or provided for the tenant’s convenience.

With respect to the Company’s health care properties and lodging facilities leased to one of its TRSs, for the rent paid pursuant to the leases to constitute “rents from real property,” the leases must be respected as true leases for U.S. federal income tax purposes. Accordingly, the leases cannot be treated as service contracts, joint ventures or some other type of arrangement. The determination of whether the leases are true leases for U.S. federal income tax purposes depends upon an analysis of all the surrounding facts and circumstances. In making such a determination, courts have considered a variety of factors, including the following:

•the intent of the parties;

•the form of the agreement;

•the degree of control over the property that is retained by the property owner (for example, whether the lessee has substantial control over the operation of the property or whether the lessee was required simply to use its best efforts to perform its obligations under the agreement); and

•the extent to which the property owner retains the risk of loss with respect to the property (for example, whether the lessee bears the risk of increases in operating expenses or the risk of damage to the property) or the potential for economic gain with respect to the property.

In addition, Section 7701(e) of the Code provides that a contract that purports to be a service contract or a partnership agreement is treated instead as a lease of property if the contract is properly treated as such, taking into account all relevant factors. Since the determination of whether a service contract should be treated as a lease is inherently factual, the presence or absence of any single factor may not be dispositive in every case.

The Company has structured, and will continue to structure, its health care property and lodging facility leases to qualify as true leases for U.S. federal income tax purposes. For example, with respect to the leases, generally:

•the property owning entity and the lessee intend for their relationship to be that of a lessor and lessee, and such relationship will be documented by a lease agreement;

•the lessee has the right to exclusive possession and use and quiet enjoyment of the property covered by the lease during the term of the lease;

•the lessee bears the cost of, and is responsible for, day-to-day maintenance and repair of the property other than the cost of certain capital expenditures, and dictates through the property manager, who works for the lessee during the terms of the lease, how the property is operated and maintained;

•the lessee bears all of the costs and expenses of operating the property, including the cost of any inventory used in their operation, during the term of the lease, other than the cost of certain furniture, fixtures and equipment, and certain capital expenditures;

•the lessee benefits from any savings and bears the burdens of any increases in the costs of operating the property during the term of the lease;

•in the event of damage or destruction to a property, the lessee will be at economic risk because it will bear the economic burden of the loss in income from operation of the property subject to the right, in certain circumstances, to terminate the lease if the lessor does not restore the property to its prior condition;

•the lessee generally indemnifies the lessor against all liabilities imposed on the lessor during the term of the lease by reason of (A) injury to persons or damage to property occurring at the property or (B) the lessee’s use, management, maintenance or repair of the property;

•the lessee is obligated to pay, at a minimum, substantial base rent for the period of use of the property under the lease;

•the lessee stands to incur substantial losses or reap substantial gains depending on how successfully it, through the property manager, who works for the lessee during the terms of the leases, operates the property;

•the lease enables the tenant to derive a meaningful profit, after expenses and taking into account the risks associated with the lease, from the operation of the property during the term of the lease; and

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•upon termination of the lease, the property will be expected to have a remaining useful life equal to at least 20% of its expected useful life on the date the lease is entered into, and a fair market value equal to at least 20% of its fair market value on the date the lease was entered into.

If, however, a lease were recharacterized as a service contract or partnership agreement, rather than a true lease, or disregarded altogether for tax purposes, all or part of the payments that the lessor receives from the lessee would not be considered rent and would not otherwise satisfy the various requirements for qualification as “rents from real property.”

As indicated above, “rents from real property” must not be based in whole or in part on the income or profits of any person. The Company intends to structure its health care property and lodging facility leases such that the leases provide for periodic payments of a specified base rent plus, to the extent that it exceeds the base rent, additional rent which is calculated based upon the gross revenues of the facilities subject to the lease, plus certain other amounts. Payments made pursuant to these leases should qualify as “rents from real property” since they are generally based on either fixed dollar amounts or on specified percentages of gross sales fixed at the time the leases were entered into. The foregoing assumes that the leases will not be renegotiated during their term in a manner that has the effect of basing either the percentage rent or base rent on income or profits.

The foregoing also assumes that the leases are not in reality used as a means of basing rent on income or profits. More generally, the rent payable under the leases will not qualify as “rents from real property” if, considering the leases and all the surrounding circumstances, the arrangement does not conform with normal business practice. It is the Company’s intention not to renegotiate the percentages used to determine the percentage rent during the terms of the leases in a manner that has the effect of basing rent on income or profits. In addition, the Company intends to structure its leases to ensure that the rental provisions and other terms of the leases conform with normal business practice and are not intended to be used as a means of basing rent on income or profits.

The Company expects to lease certain items of personal property to its TRS lessees in connection with its lodging facility leases. Under the Code, if a lease provides for the rental of both real and personal property and the portion of the rent attributable to personal property is 15% or less of the total rent due under the lease, then all rent paid pursuant to such lease qualifies as “rents from real property.” If, however, a lease provides for the rental of both real and personal property, and the portion of the rent attributable to personal property exceeds 15% of the total rent due under the lease, then no portion of the rent that is attributable to personal property will qualify as “rents from real property.” The amount of rent attributable to personal property is the amount that bears the same ratio to total rent for the taxable year as the average of the fair market value of the personal property at the beginning and end of the year bears to the average of the aggregate fair market value of both the real and personal property at the beginning and end of such year. The Company expects that, with respect to its lodging facility leases, either the amount of rent attributable to personal property will not exceed 15% of the total rent due under the lease (determined under the law in effect for the applicable period), or, if the rent attributable to personal property constitutes non-qualifying income, such amounts, when taken together with all other non-qualifying income earned by the Company, will not jeopardize its qualification as a REIT.

Interest

The term “interest,” as defined for purposes of both gross income tests, generally excludes any amount that is based, in whole or in part, on the income or profits of any person. However, interest generally includes the following:

•an amount that is based on a fixed percentage or percentages of receipts or sales; and

•an amount that is based on the income or profits of a debtor, as long as the debtor derives substantially all of its income from the real property securing the debt from leasing substantially all of its interest in the property and only to the extent that the amounts received by the debtor would be qualifying “rents from real property” if received directly by a REIT.

If a loan contains a provision that entitles a REIT to a percentage of the borrower’s gain upon the sale of the real property securing the loan or a percentage of the appreciation in the property’s value as of a specific date, income attributable to that loan provision will be treated as gain from the sale of the property securing the loan, which generally is qualifying income for purposes of both gross income tests, provided that the property is not inventory or dealer property in the hands of the borrower or the REIT.

Interest on debt secured by mortgages on real property or on interests in real property (including, in the case of a loan secured by real property and personal property, such personal property to the extent that it does not exceed 15% of the total fair market value of all such property securing the loan), including, for this purpose, prepayment penalties, loan assumption fees and late payment charges that are not compensation for services, generally is qualifying income for purposes of the 75% gross income test. In general, under applicable Treasury Regulations, if a loan is secured by real property and other property and the highest principal amount of the loan outstanding during a taxable year exceeds the

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fair market value of the real property securing the loan determined as of: (i) the date the Company agreed to acquire or originate the loan; or (ii) as discussed further below, in the event of a “significant modification,” the date the Company modified the loan, then a portion of the interest income from such loan will not be qualifying income for purposes of the 75% gross income test, but will be qualifying income for purposes of the 95% gross income test. The portion of the interest income that will not be qualifying income for purposes of the 75% gross income test will be equal to the portion of the principal amount of the loan that is not secured by real property—that is, the amount by which the loan exceeds the value of the real property that is security for the loan. As discussed further below, IRS guidance provides that the Company does not need to redetermine fair market value of the real property securing the loan in connection with a loan modification that is occasioned by a borrower default or made at a time when the Company reasonably believes that the modification to the loan will substantially reduce a significant risk of default on the loan.

The Company may invest in loans secured by real property that is under construction or being significantly improved, in which case the value of the real estate that is security for the loan will be the fair market value of the land plus the reasonably estimated cost of the improvements or developments (including, in the case of a loan secured by real property and personal property, such personal property to the extent that it does not exceed 15% of the total fair market value of all such property securing the loan) which will secure the loans and which are to be constructed from proceeds of the loan.

The Company holds certain mezzanine loans and may originate or acquire other mezzanine loans. Mezzanine loans are loans secured by equity interests in an entity that directly or indirectly owns real property, rather than by a direct mortgage of the real property. In Revenue Procedure 2003-65, the IRS established a safe harbor under which loans secured by a first priority security interest in ownership interests in a partnership or limited liability company owning real property will be treated as real estate assets for purposes of the REIT asset tests described below, and interest derived from those loans will be treated as qualifying income for both the 75% and 95% gross income tests, provided several requirements are satisfied.

Although Revenue Procedure 2003-65 provides a safe harbor on which taxpayers may rely, it does not prescribe rules of substantive tax law. Moreover, the Company expects that some of its mezzanine loans may not meet all of the requirements for reliance on the safe harbor. To the extent any mezzanine loans that the Company originates or acquires do not qualify for the safe harbor described above, the interest income from the loans will be qualifying income for purposes of the 95% gross income test, but there is a risk that such interest income will not be qualifying income for purposes of the 75% gross income test. We believe that we currently invest in mezzanine loans, and intend to continue to invest in mezzanine loans, in a manner that will enable us to satisfy the REIT gross income and asset tests.

The Company and its subsidiaries hold certain participation interests, or subordinated mortgage interests, in mortgage loans and mezzanine loans originated by other lenders. A subordinated mortgage interest is an interest created in an underlying loan by virtue of a participation or similar agreement, to which the originator of the loan is a party, along with one or more participants. The borrower on the underlying loan is typically not a party to the participation agreement. The performance of a participant’s investment depends upon the performance of the underlying loan and if the underlying borrower defaults, the participant typically has no recourse against the originator of the loan. The originator often retains a senior position in the underlying loan and grants junior participations, which will be a first loss position in the event of a default by the borrower. The Company expects that its (and its subsidiaries’) participation interests generally will qualify as real estate assets for purposes of the REIT asset tests described below and that interest derived from such investments generally will be treated as qualifying interest for purposes of the 75% gross income test. The appropriate treatment of participation interests for U.S. federal income tax purposes is not entirely certain, however, and no assurance can be given that the IRS will not challenge the Company’s treatment of its participation interests.

Many of the terms of the mortgage loans, mezzanine loans and subordinated mortgage interests and the loans supporting the mortgage-backed securities that the Company holds or expects to acquire have been modified and may in the future be modified. Under the Code, if the terms of a loan are modified in a manner constituting a “significant modification,” such modification triggers a deemed exchange of the original loan for the modified loan. Revenue Procedure 2014-51 provides a safe harbor pursuant to which the Company will not be required to redetermine the fair market value of the real property securing a loan for purposes of the gross income and asset tests in connection with a loan modification that is: (i) occasioned by a borrower default; or (ii) made at a time when the Company reasonably believes that the modification to the loan will substantially reduce a significant risk of default on the original loan. No assurance can be provided that all of the Company’s loan modifications will qualify for the safe harbor in Revenue Procedure 2014-51. To the extent the Company significantly modifies loans in a manner that does not qualify for that safe harbor, it will be required to redetermine the value of the real property securing the loan at the time it was significantly modified. In determining the value of the real property securing such a loan, the Company generally will not obtain third-party appraisals but rather will rely on internal valuations. No assurance can be provided that the IRS will not successfully challenge the Company’s internal valuations. If the terms of the Company’s mortgage loans, mezzanine loans and subordinated mortgage interests and loans supporting its mortgage-backed securities are significantly modified in a

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manner that does not qualify for the safe harbor in Revenue Procedure 2014-51 and the fair market value of the real property securing such loans has decreased significantly, the Company could fail the 75% gross income test, the 75% asset test and/or the 10% value test.

The Company and its subsidiaries also hold, and may in the future, acquire distressed mortgage loans. Revenue Procedure 2014-51 provides that the IRS will treat distressed mortgage loans acquired by a REIT that are secured by real property and other property as producing in part non-qualifying income for the 75% gross income test. Specifically, Revenue Procedure 2014-51 indicates that interest income on such a distressed mortgage loan will be treated as qualifying income based on the ratio of: (i) the fair market value of the real property securing the debt determined as of the date the REIT committed to acquire the loan; and (ii) the face amount of the loan (and not the purchase price or current value of the debt). The face amount of a distressed mortgage loan will typically exceed the fair market value of the real property securing the mortgage loan on the date the REIT commits to acquire the loan. It is unclear how the safe harbor in Revenue Procedure 2014-51 is affected by the recent legislative changes regarding the treatment of personal property securing a mortgage loan. The Company intends to invest in distressed mortgage loans in a manner that consistent with qualifying as a REIT.

The Company and its subsidiaries have entered into certain sale and repurchase agreements under which it nominally sells certain mortgage assets to a counterparty and simultaneously enters into an agreement to repurchase the sold assets. Based on positions the IRS has taken in analogous situations, the Company believes that it will be treated for purposes of the REIT gross income and asset tests (refer below to the section entitled “—Asset Tests”) as the owner of the mortgage assets that are the subject of any such agreement notwithstanding that record ownership of the assets is transferred to the counterparty during the term of the agreement. It is possible, however, that the IRS could assert that the Company does not own the mortgage assets during the term of the sale and repurchase agreement, in which case its ability to qualify as a REIT could be adversely affected.

The Company may invest in other agency securities that are pass-through certificates. The Company expects that any such agency securities will be treated as either interests in a grantor trust or as interests in a REMIC for U.S. federal income tax purposes and that all interest income from such agency securities will be qualifying income for the 95% gross income test. In the case of agency securities treated as interests in grantor trusts, the Company would be treated as owning an undivided beneficial ownership interest in the mortgage loans held by the grantor trust. The interest on such mortgage loans would be qualifying income for purposes of the 75% gross income test to the extent that such loan is secured by real property, as discussed above. In the case of agency securities treated as interests in a REMIC, income derived from such REMIC interests generally will be treated as qualifying income for purposes of the 75% gross income test. As discussed above, however, if less than 95% of the assets of the REMIC are real estate assets then only a proportionate part of the income derived from the Company’s interest in the REMIC will qualify for purposes of the 75% gross income tests. To the extent that a REMIC interest includes an imbedded interest swap or cap contract or other derivative instrument, such derivative instrument could produce non-qualifying income for purposes of the 75% gross income test. The Company expects that substantially all of its income from agency securities will be qualifying income for purposes of the 75% and 95% gross income tests.

Dividends; Subpart F Income

The Company’s share of any dividends received from any corporation (including any TRS, but excluding any REIT) in which it owns an equity interest will qualify for purposes of the 95% gross income test but not for purposes of the 75% gross income test. The Company’s share of any dividends received from any other REIT in which it owns an equity interest, including any subsidiary REIT, will be qualifying income for purposes of both gross income tests.

In addition, the Company may be required to include in gross income its share of “Subpart F income” of one or more foreign (non-U.S.) corporations in which it invests, including its foreign TRSs, regardless of whether it receives distributions from such corporations. The Company will treat certain income inclusions received with respect to equity investments in foreign TRSs as qualifying income for purposes of the 95% gross income test but not the 75% gross income test. The IRS has issued private letter rulings to other taxpayers concluding that similar income inclusions will be treated as qualifying income for purposes of the 95% gross income test. Those private letter rulings can only be relied upon by the taxpayers to whom they were issued. No assurance can be provided that the IRS will not successfully challenge the Company’s treatment of such income inclusions.

Fee Income

The Company expects to receive various fees in connection with its operations. Fee income will be qualifying income for purposes of both the 75% and 95% gross income tests if it is received in consideration for entering into an agreement to make a loan secured by mortgages on or interests in real property, and the fees are not determined by the income and profits of any person. Other fees, such as origination and servicing fees, fees for acting as a broker-dealer and fees for

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managing investments for third parties, are not qualifying income for purposes of either gross income test. Any fees earned by a TRS are not included for purposes of the gross income tests.

Hedging Transactions

From time to time, the Company and its subsidiaries expect to enter into hedging transactions with respect to one or more of its assets or liabilities. The Company’s hedging activities may include entering into interest rate swaps, caps and floors, options to purchase such items and futures and forward contracts. Income and gain from “qualified hedging transactions” are excluded from gross income for purposes of the 75% and 95% gross income tests. A “qualified hedging transaction” includes: (i) any transaction entered into in the normal course of the Company’s trade or business primarily to manage the risk of interest rate, price changes or currency fluctuations with respect to borrowings made or to be made, or ordinary obligations incurred or to be incurred, to acquire or carry real estate assets; (ii) any transaction entered into primarily to manage the risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the 75% or 95% gross income test (or any property which generates such income or gain); and (iii) any transaction entered into to “offset” a transaction described in (i) or (ii) if a portion of the hedged indebtedness is extinguished or the related property disposed of. The Company will be required to clearly identify any such hedging transaction before the close of the day on which it was acquired, originated or entered into and to satisfy other identification requirements in order to be treated as a qualified hedging transaction. The Company intends to structure any hedging transactions in a manner that does not jeopardize its qualification as a REIT.

COD Income

From time to time, the Company and its subsidiaries may recognize COD income, in connection with repurchasing debt at a discount. COD income is excluded from gross income for purposes of both the 75% and 95% gross income tests.

Foreign Currency Gain

Certain foreign currency gain is excluded from gross income for purposes of one or both of the gross income tests. “Real estate foreign exchange gain” is excluded from gross income for purposes of the 75% gross income test. Real estate foreign exchange gain generally includes foreign currency gain attributable to any item of income or gain that is qualifying income for purposes of the 75% gross income test, foreign currency gain attributable to the acquisition or ownership of (or becoming or being the obligor under) obligations and certain foreign currency gain attributable to certain “qualified business units” of a REIT. “Passive foreign exchange gain” is excluded from gross income for purposes of the 95% gross income test. Passive foreign exchange gain generally includes real estate foreign exchange gain as described above and also includes foreign currency gain attributable to any item of income or gain that is qualifying income for purposes of the 95% gross income test and foreign currency gain attributable to the acquisition or ownership of (or becoming or being the obligor under) obligations secured by mortgages on real property or on interests in real property. Because passive foreign exchange gain includes real estate foreign exchange gain, real estate foreign exchange gain is excluded from gross income for purposes of both the 75% and 95% gross income tests. These exclusions for real estate foreign exchange gain and passive foreign exchange gain do not apply to certain foreign currency gain derived from dealing, or engaging in substantial and regular trading, in securities, which is treated as non-qualifying income for purposes of both the 75% and 95% gross income tests.

Prohibited Transactions

A REIT will incur a 100% tax on the net income derived from any sale or other disposition of property, other than foreclosure property, that the REIT holds primarily for sale to customers in the ordinary course of a trade or business. The Company believes that none of its assets are held or will be held primarily for sale to customers and that a sale of any of its assets has not been, and will not be, in the ordinary course of its business. Whether a REIT holds an asset “primarily for sale to customers in the ordinary course of a trade or business” depends, however, on the facts and circumstances in effect from time to time, including those related to a particular asset. A safe harbor to the characterization of the sale of property by a REIT as a prohibited transaction and the 100% prohibited transaction tax is available if the following requirements are met:

•the REIT has held the property for not less than two years;

•the aggregate expenditures made by the REIT, or any partner of the REIT, during the two-year period preceding the date of the sale that are includable in the basis of the property do not exceed 30% of the selling price of the property;

•either: (i) during the year in question, the REIT did not make more than seven sales of property other than foreclosure property or sales to which Section 1031 or 1033 of the Code applies; (ii) the aggregate adjusted bases of all such properties sold by the REIT during the year did not exceed 10% of the aggregate bases of all of the

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assets of the REIT at the beginning of the year; (iii) the aggregate fair market value of all such properties sold by the REIT during the year did not exceed 10% of the aggregate fair market value of all of the assets of the REIT at the beginning of the year; (iv)(A) the aggregate adjusted tax bases of all such properties sold by the REIT during the year did not exceed 20% of the aggregate adjusted bases of all property of the REIT at the beginning of the year and (B) the three-year average percentage of properties sold by the REIT compared to all the REIT’s properties (measured by adjusted bases) taking into account the current and two prior years did not exceed 10%; or (v)(A) the aggregate fair market value of all such properties sold by the REIT during the year did not exceed 20% of the aggregate fair market value of all property of the REIT at the beginning of the year and (B) the three-year average percentage of properties sold by the REIT compared to all the REIT’s properties (measured by fair market value) taking into account the current and two prior years did not exceed 10%;

•in the case of property not acquired through foreclosure or lease termination, the REIT has held the property for at least two years for the production of rental income; and

•if the REIT has made more than seven sales of non-foreclosure property during the taxable year, substantially all of the marketing and development expenditures with respect to the property were made through an independent contractor from whom the REIT derives no income or a TRS.

No assurance can be given that any property that the Company sells will not be treated as property held “primarily for sale to customers in the ordinary course of a trade or business” or that the Company will be able to comply with the safe harbor when disposing of assets. The 100% tax will not apply to gains from the sale of property that is held through a TRS or other taxable corporation, although such income will be taxed to the corporation at regular corporate income tax rates. The Company intends to structure its activities to avoid transactions that would result in a material amount of prohibited transaction tax.

Foreclosure Property

The Company will be subject to tax at the maximum corporate rate on any income from foreclosure property, which includes certain foreign currency gains and related deductions recognized, other than income that otherwise would be qualifying income for purposes of the 75% gross income test, less expenses directly connected with the production of that income. However, gross income from foreclosure property will qualify under the 75% and 95% gross income tests. Foreclosure property is any real property, including interests in real property, and any personal property incident to such real property:

•that is acquired by a REIT as the result of the REIT having bid on such property at foreclosure or having otherwise reduced such property to ownership or possession by agreement or process of law, after there was a default or default was imminent on a lease of such property or on indebtedness that such property secured;

•for which the related loan was acquired by the REIT at a time when the default was not imminent or anticipated; and

•for which the REIT makes a proper election to treat the property as foreclosure property.

A REIT will not be considered to have foreclosed on a property where the REIT takes control of the property as a mortgagee-in-possession and cannot receive any profit or sustain any loss except as a creditor of the mortgagor. Property generally ceases to be foreclosure property at the end of the third taxable year following the taxable year in which the REIT acquired the property or longer if an extension is granted by the Secretary of the Treasury. However, this grace period terminates and foreclosure property ceases to be foreclosure property on the first day:

•on which a lease is entered into for the property that, by its terms, will give rise to income that does not qualify for purposes of the 75% gross income test, or any amount is received or accrued, directly or indirectly, pursuant to a lease entered into on or after such day that will give rise to income that does not qualify for purposes of the 75% gross income test;

•on which any construction takes place on the property, other than completion of a building or any other improvement, where more than 10% of the construction was completed before default became imminent; or

•which is more than 90 days after the day on which the REIT acquired the property and the property is used in a trade or business which is conducted by the REIT, other than through an independent contractor from whom the REIT itself does not derive or receive any income or a TRS.

The Company may acquire properties as a result of foreclosure or otherwise reducing the property to ownership when default has occurred or is imminent and may make foreclosure property elections with respect to some or all of those properties if such election is available (which may not be the case with respect to acquired “distressed loans”).

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Cash/Income Differences/Phantom Income

Due to the nature of the assets in which the Company invests, the Company may be required to recognize taxable income from those assets in advance of its receipt of cash flow on or proceeds from disposition of such assets, and may be required to report taxable income in early periods that exceeds the economic income ultimately realized on such assets.

The Company may acquire debt instruments in the secondary market for less than their face amount. The amount of such discount generally will be treated as “market discount” for U.S. federal income tax purposes. The Company may elect to include in taxable income accrued market discount as it accrues rather than as it is realized for economic purposes, resulting in phantom income. Principal payments on certain loans are made monthly, and consequently accrued market discount may have to be included in income each month as if the debt instrument were assured of ultimately being collected in full. If the Company collects less on the debt instrument than its purchase price plus the market discount it had previously reported as income, it may not be able to benefit from any offsetting loss deductions.

The Company may acquire mortgage-backed securities that have been issued with original issue discount. In general, the Company will be required to accrue original issue discount based on the constant yield to maturity of the mortgage-backed security, and to treat it as taxable income in accordance with applicable U.S. federal income tax rules even though smaller or no cash payments are received on such debt instrument. As in the case of the market discount discussed in the preceding paragraph, the constant yield in question will be determined and the Company will be taxed based on the assumption that all future payments due on the mortgage-backed security in question will be made. If all payments on the mortgage-backed securities are not made, the Company may not be able to benefit from any offsetting loss deductions.

In addition, pursuant to its investment strategy, the Company may acquire distressed debt instruments and subsequently modify such instruments by agreement with the borrower. If the amendments to the outstanding debt are “significant modifications” under the applicable Treasury Regulations, the modified debt may be considered to have been reissued to the Company in a debt-for-debt exchange with the borrower. In that event, the Company may be required to recognize income to the extent the principal amount of the modified debt exceeds its adjusted tax basis in the unmodified debt, and would hold the modified loan with a cost basis equal to its principal amount for U.S. federal tax purposes. To the extent that such modifications are made with respect to a debt instrument held by a TRS treated as a dealer, as described above, such a TRS would be required at the end of each taxable year, including the taxable year in which such modification was made, to mark the modified debt instrument to its fair market value as if the debt instrument were sold. In that case, the TRS generally would recognize a loss at the end of the taxable year in which the modifications were made to the extent the fair market value of such debt instrument were less than its principal amount after the modification.

In addition, in the event that any debt instruments or mortgage-backed securities acquired by the Company are delinquent as to mandatory principal and interest payments, or in the event payments with respect to a particular debt instrument are not made when due, the Company may nonetheless be required to continue to recognize the unpaid interest as taxable income. Similarly, the Company may be required to accrue interest income with respect to subordinate mortgage-backed securities at the stated rate regardless of whether corresponding cash payments are received.

The Company may also be required under the terms of indebtedness that it incurs to private lenders or otherwise to use cash received from interest payments to make principal payments on that indebtedness, with the effect of recognizing income but not having a corresponding amount of cash available for distribution to holders of its securities.

Due to each of these potential timing differences between income recognition or expense deduction and cash receipts or disbursements, there is a significant risk that the Company may have substantial taxable income in excess of cash available for distribution. In that event, the Company may need to borrow funds or take other action to satisfy the REIT distribution requirements for the taxable year in which this “phantom income” is recognized. Refer below to the section entitled “—Distribution Requirements.”

Failure to Satisfy the Gross Income Tests

If the Company fails to satisfy one or both of the gross income tests for any taxable year, it nevertheless may qualify as a REIT for that year if it qualifies for relief under certain provisions of the U.S. federal income tax laws. Those relief provisions are available if:

•the Company’s failure to meet those tests is due to reasonable cause and not to willful neglect; and

•following such failure for any taxable year, the Company files a schedule of the sources of its income with the IRS.

The Company cannot predict, however, whether in all circumstances it would qualify for the relief provisions. In addition, as discussed above in the section entitled “—Taxation of Colony Capital,” even if the relief provisions apply, the

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Company would incur a 100% tax on the gross income attributable to the greater of the amount by which it fails the 75% or 95% gross income test, in each case, multiplied by a fraction intended to reflect its profitability.

Asset Tests

To qualify as a REIT, the Company also must satisfy the following asset tests at the end of each quarter of each taxable year. First, at least 75% of the value of its total assets must consist of:

•cash or cash items, including certain receivables and money market funds;

•government securities;

•interests in real property, including leaseholds, options to acquire real property and leaseholds, and personal property to the extent such personal property is leased in connection with real property and rents attributable to such personal property are treated as “rents from real property”;

•interests in mortgage loans secured by real property;

•stock in other REITs and debt instruments issued by “publicly offered REITs”;

•investments in stock or debt instruments during the one-year period following the Company’s receipt of new capital that it raises through equity offerings or public offerings of debt with at least a five-year term; and

•regular or residual interests in a REMIC. However, if less than 95% of the assets of a REMIC consist of assets that are qualifying real estate-related assets under the U.S. federal income tax laws, determined as if the Company held such assets, the Company will be treated as holding directly its proportionate share of the assets of such REMIC.

Second, of the Company’s investments not included in the 75% asset class, the value of its interest in any one issuer’s securities may not exceed 5% of the value of its total assets, which we refer to as the 5% asset test.

Third, of the Company’s investments not included in the 75% asset class, it may not own more than 10% of the voting power or value of any one issuer’s outstanding securities, which we refer to as the 10% vote or value test.

Fourth, no more than 20% (25% for our taxable year ended December 31, 2017) of the value of the Company’s total assets may consist of the securities of one or more TRSs.

Fifth, no more than 25% of the value of the Company’s total assets may consist of securities that are not qualifying assets for purposes of the 75% asset test described above, which we refer to as the 25% securities test.

Sixth, no more than 25% of the value of the Company’s total assets may consist of debt instruments issued by “publicly offered REITs” to the extent such debt instruments are not secured by real property or interests in real property.

For purposes of the 5% asset test, the 10% vote or value test and the 25% securities test, the term “securities” does not include stock in another REIT, debt of a “publicly offered REIT,” equity or debt securities of a QRS or, in the case of the 5% asset test and 10% vote or value test, TRS debt or equity, mortgage loans or mortgage-backed securities that constitute real estate assets, or equity interests in a partnership. The term “securities,” however, generally includes debt securities issued by a partnership or another REIT (other than a “publicly offered REIT”), except, for purposes of the 10% value test, the term “securities” does not include:

•“Straight debt” securities, which is defined as a written unconditional promise to pay on demand or on a specified date a sum certain in money if: (i) the debt is not convertible, directly or indirectly, into equity; and (ii) the interest rate and interest payment dates are not contingent on profits, the borrower’s discretion, or similar factors. “Straight debt” securities do not include any securities issued by a partnership or a corporation in which the Company or any TRS in which the Company owns more than 50% of the voting power or value of the shares hold non-”straight debt” securities that have an aggregate value of more than 1% of the issuer’s outstanding securities. However, “straight debt” securities include debt subject to the following contingencies:

•a contingency relating to the time of payment of interest or principal, as long as either: (i) there is no change to the effective yield of the debt obligation, other than a change to the annual yield that does not exceed the greater of 0.25% or 5% of the annual yield; or (ii) neither the aggregate issue price nor the aggregate face amount of the issuer’s debt obligations held by the Company exceeds $1 million and no more than 12 months of unaccrued interest on the debt obligations can be required to be prepaid; and

•a contingency relating to the time or amount of payment upon a default or prepayment of a debt obligation, as long as the contingency is consistent with customary commercial practice;

•Any loan to an individual or an estate;

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•Any “section 467 rental agreement” other than an agreement with a related party tenant;

•Any obligation to pay “rents from real property”;

•Certain securities issued by governmental entities;

•Any security issued by a REIT;

•Any debt instrument issued by an entity treated as a partnership for U.S. federal income tax purposes in which the Company is a partner to the extent of its proportionate interest in the equity and debt securities of the partnership; and

•Any debt instrument issued by an entity treated as a partnership for U.S. federal income tax purposes not described in the preceding bullet points if at least 75% of the partnership’s gross income, excluding income from prohibited transactions, is qualifying income for purposes of the 75% gross income test described above in the section entitled “—Gross Income Tests.”

For purposes of the 10% value test, the Company’s proportionate share of the assets of a partnership is its proportionate interest in any securities issued by the partnership, without regard to the securities described in the last two bullet points above.

The Company’s holdings of securities and other assets have complied, and will continue to comply, with the foregoing asset tests, and the Company intends to monitor its compliance on an ongoing basis. However, independent appraisals have not been obtained to support the Company’s conclusions as to the value of its assets or the value of any particular security or securities. Moreover, values of some assets, including instruments issued in collateralized debt obligation transactions, may not be susceptible to a precise determination, and values are subject to change in the future.

Furthermore, the proper classification of an instrument as debt or equity for U.S. federal income tax purposes may be uncertain in some circumstances, which could affect the application of the asset tests. Accordingly, there can be no assurance that the IRS will not contend that the Company’s interests in its subsidiaries or in the securities of other issuers will not cause a violation of the asset tests.

As described above, Revenue Procedure 2003-65 provides a safe harbor pursuant to which certain mezzanine loans secured by a first priority security interest in ownership interests in a partnership or limited liability company will be treated as qualifying assets for purposes of the 75% asset test (and therefore, are not subject to the 5% asset test and the 10% vote or value test). Refer to the section entitled “—Gross Income Tests.” The Company expects that some of its mezzanine loans may not qualify for that safe harbor. To the extent that the Company determines that a mezzanine loan likely would not qualify for the safe harbor and also would not be excluded from the definition of securities for purposes of the 10% vote or value test or could cause the Company not to satisfy the 75% or 5% assets tests, it would hold that mezzanine loan through a taxable REIT subsidiary.

The Company owns stock in several REITS and expects to invest in the stock of other entities that intend to qualify as REITs in the future. The Company believes that any stock that it has acquired or will acquire in other REITs has been, or will be, qualifying assets for purposes of the 75% asset test. If a REIT in which the Company owns stock fails to qualify as a REIT in any year, however, the stock in such REIT will not be a qualifying asset for purposes of the 75% asset test. Instead, the Company would be subject to the 5% asset test, the 10% vote or value test and the 25% securities test described above with respect to its investment in such a disqualified REIT. Consequently, if a REIT in which the Company owns stock fails to qualify as a REIT, the Company could fail one or more of the asset tests described above. To the extent the Company invests in other REITs, it intends to do so in a manner that will enable it to continue to satisfy the REIT asset tests.

As discussed above in the section entitled “—Gross Income Tests,” the Company and its subsidiaries may invest in distressed mortgage loans. In general, under the applicable Treasury Regulations, if a loan is secured by real property and other property and the highest principal amount of the loan outstanding during a taxable year exceeds the fair market value of the real property securing the loan as of: (i) the date the Company agreed to acquire or originate the loan; or (ii) in the event of a significant modification, the date the Company modified the loan, then a portion of the interest income from such a loan will not be qualifying income for purposes of the 75% gross income test but will be qualifying income for purposes of the 95% gross income test. Although the law is not entirely clear, a portion of the loan will also likely be a non-qualifying asset for purposes of the 75% asset test. The non-qualifying portion of such a loan would be subject to, among other requirements, the 10% vote or value test. IRS Revenue Procedure 2014-51 provides a safe harbor under which the IRS has stated that it will not challenge a REIT’s treatment of a loan as being, in part, a qualifying real estate asset in an amount equal to the lesser of: (i) the fair market value of the loan on the relevant quarterly REIT asset testing date; or (ii) the greater of (A) the fair market value of the real property securing the loan on the relevant quarterly REIT asset testing date or (B) the fair market value of the real property securing the loan determined as of the date the REIT committed to

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originate or acquire the loan. It is unclear how the safe harbor in Revenue Procedure 2014-51 is affected by the recent legislative changes regarding the treatment of loans secured by both real property and personal property where the fair market value of the personal property does not exceed 15% of the sum of the fair market values of the real property and the personal property securing the loan. There can be no assurance that later interpretations of or any clarifications to this Revenue Procedure will be consistent with how the Company currently is applying it to its REIT compliance analysis. The Company intends to invest in distressed mortgage loans in a manner consistent with qualifying as a REIT.

Also as discussed above, the Company intends to invest in agency securities that are pass-through certificates. The Company expects that the agency securities will be treated either as interests in grantor trusts or as interests in REMICs for U.S. federal income tax purposes. In the case of agency securities treated as interests in grantor trusts, the Company would be treated as owning an undivided beneficial ownership interest in the mortgage loans held by the grantor trust. Such mortgage loans generally will qualify as real estate assets to the extent that they are secured by real property. The Company expects that substantially all of its agency securities treated as interests in a grantor trust will qualify as real estate assets. In the case of agency securities treated as interests in a REMIC, such interests generally will qualify as real estate assets. If less than 95% of the assets of a REMIC are real estate assets, however, then only a proportionate part of the Company’s interest in the REMIC will qualify as a real estate asset. To the extent that the Company holds mortgage participations or mortgage-backed securities that do not represent interests in a grantor trust or REMIC interests, such assets may not qualify as real estate assets depending upon the circumstances and the specific structure of the investment.

Failure to Satisfy the Asset Tests

The Company has monitored, and will continue to monitor, the status of its assets for purposes of the various asset tests. If the Company fails to satisfy the asset tests at the end of a calendar quarter, it will not lose its REIT qualification if:

•the Company satisfied the asset tests at the end of the preceding calendar quarter; and

•the discrepancy between the value of the Company’s assets and the asset test requirements arose from changes in the market values of its assets and was not wholly or partly caused by the acquisition of one or more non-qualifying assets.

If the Company does not satisfy the condition described in the second item, above, it still could avoid disqualification by eliminating any discrepancy within 30 days after the close of the calendar quarter in which it arose.

If at the end of any calendar quarter the Company violates the 5% asset test or the 10% vote or value test described above, it will not lose its REIT qualification if: (i) the failure is de minimis (up to the lesser of 1% of its assets or $10 million); and (ii) it disposes of assets causing the failure or otherwise complies with the asset tests within six months after the last day of the quarter in which it identifies such failure. In the event of a failure of any of the asset tests (other than de minimis failures described in the preceding sentence), as long as the failure was due to reasonable cause and not to willful neglect, the Company will not lose its REIT status if it: (i) disposes of assets or otherwise complies with the asset tests within six months after the last day of the quarter in which it identifies the failure; (ii) it files a description of each asset causing the failure with the IRS; and (iii) pays a tax equal to the greater of $50,000 or 21% of the net income from the non-qualifying assets during the period in which the Company failed to satisfy the asset tests.

Distribution Requirements

Each taxable year, the Company must distribute dividends, other than capital gain dividends and deemed distributions of retained capital gain, to our stockholders in an aggregate amount at least equal to the sum of:

•90% of its “REIT taxable income,” computed without regard to the dividends paid deduction and its net capital gain or loss; and

•90% of its after-tax net income, if any, from foreclosure property; minus

•the sum of certain items of non-cash income.

Generally, the Company must pay such distributions in the taxable year to which they relate, or in the following taxable year if: (i) the Company declares the distribution before it timely files its U.S. federal income tax return for the year and pays the distribution on or before the first regular dividend payment date after such declaration; or (ii) the Company declares the distribution in October, November or December of the taxable year, payable to stockholders of record on a specified day in any such month, and it actually pays the dividend before the end of January of the following year. The distributions under clause (i) are taxable to the stockholders in the year in which paid and the distributions in clause (ii) are treated as paid on December 31 of the prior taxable year. In both instances, these distributions relate to the Company’s prior taxable year for purposes of the 90% distribution requirement.

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Unless the Company qualifies as a “publicly offered REIT,” in order for its distributions to be counted as satisfying the annual distribution requirement for REITs and to provide it with the REIT-level tax deduction, such distributions must not have been “preferential dividends.” A dividend is not a preferential dividend if that distribution is: (i) pro rata among all outstanding shares within a particular class; and (ii) in accordance with the preferences among different classes of stock as set forth in the Company’s organizational documents. The Company expects to qualify as “publicly offered REIT,” and so long as it qualifies as a “publicly offered REIT,” the preferential dividend rule will not apply to it.

The Company will pay U.S. federal income tax on taxable income, including net capital gain, that it does not distribute to stockholders. Furthermore, if the Company fails to distribute during a calendar year, or by the end of January following the calendar year in the case of distributions with declaration and record dates falling in the last three months of the calendar year, at least the sum of:

•85% of its REIT ordinary income for such year;

•95% of its REIT capital gain income for such year; and

•any undistributed taxable income from prior periods,

The Company will incur a 4% nondeductible excise tax on the excess of such required distribution over the amounts it actually distributes.

The Company may elect to retain and pay income tax on the net long-term capital gain it receives in a taxable year. If the Company so elects, it will be treated as having distributed any such retained amount for purposes of the 4% nondeductible excise tax described above. The Company intends to make timely distributions sufficient to satisfy the annual distribution requirements and to avoid corporate income tax and the 4% nondeductible excise tax.

It is possible that, from time to time, the Company may experience timing differences between the actual receipt of income and or payment of deductible expenses and the inclusion of that income or deduction in arriving at its REIT taxable income. Other potential sources of non-cash taxable income include gain recognized on the deemed exchange of distressed debt that has been modified, real estate and securities that have been financed through securitization structures, such as the collateralized debt obligation structure, which require some or all of available cash flow to be used to service borrowings, loans or mortgage-backed securities that the Company holds that have been issued at a discount and require the accrual of taxable economic interest in advance of its receipt in cash and distressed loans on which the Company may be required to accrue taxable interest income even though the borrower is unable to make current servicing payments in cash. Furthermore, under amendments to Section 451 of the Code made by H.R. 1, subject to certain exceptions, the Company must accrue income for U.S. federal income tax purposes no later than when such income is taken into account as revenue in our financial statements, which could create additional differences between REIT taxable income and the receipt of cash attributable to such income. In addition, Section 162(m) of the Code places a per-employee limit of $1 million on the amount of compensation that a publicly held corporation may deduct in any one year with respect to its chief executive officer and certain other highly compensated executive officers. Changes to Section 162(m) made by H.R. 1 eliminated an exception that formerly permitted certain performance-based compensation to be deducted even if in excess of $1 million, which may have the effect of increasing our REIT taxable income. In the event that such timing differences occur, it might be necessary to arrange borrowings or other means of raising capital to meet the distribution requirements. Additionally, the Company may, if possible, pay taxable dividends of our stock or debt to meet the distribution requirements.

On August 11, 2017, the IRS issued Revenue Procedure 2017-45, authorizing elective stock dividends to be made by public REITs. Pursuant to this revenue procedure, effective for distributions declared on or after August 11, 2017, the IRS will treat the distribution of stock pursuant to an elective stock dividend as a distribution of property under Section 301 of the Code (i.e., as a dividend to the extent of our earnings and profits), as long as at least 20% of the total dividend is available in cash and certain other requirements outlined in the revenue procedure are met.

Under certain circumstances, the Company may be able to correct a failure to meet the distribution requirement for a year by paying “deficiency dividends” to our stockholders in a later year. The Company may include such deficiency dividends in its deduction for dividends paid for the earlier year. Although the Company may be able to avoid income tax on amounts distributed as deficiency dividends, it will be required to pay interest to the IRS based upon the amount of any deduction it takes for deficiency dividends.

In addition, a REIT is required to distribute all accumulated earnings and profits attributable to non-REIT years by the close of its first taxable year in which it has non-REIT earnings and profits to distribute.

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Interest Deduction Limitation Enacted by H.R. 1

Commencing in taxable years beginning after December 31, 2017, Section 163(j) of the Code, as amended by H.R. 1, limits the deductibility of net interest expense paid or accrued on debt properly allocable to a trade or business to 30% of “adjusted taxable income,” subject to certain exceptions. Any deduction in excess of the limitation is carried forward and may be used in a subsequent year, subject to the 30% limitation. Adjusted taxable income is determined without regard to certain deductions, including those for net interest expense, net operating loss carryforwards and, for taxable years beginning before January 1, 2022, depreciation, amortization and depletion. Provided the taxpayer makes a timely election (which is irrevocable), the 30% limitation does not apply to a trade or business involving real property development, redevelopment, construction, reconstruction, rental, operation, acquisition, conversion, disposition, management, leasing or brokerage, within the meaning of Section 469(c)(7)(C) of the Code. If this election is made, depreciable real property (including certain improvements) held by the relevant trade or business must be depreciated under the alternative depreciation system under the Code, which is generally less favorable than the generally applicable system of depreciation under the Code. If we do not make the election or if the election is determined not to be available with respect to all or certain of our business activities, this interest deduction limitation could result in us having more REIT taxable income and thus increase the amount of distributions we must make to comply with the REIT requirements and avoid incurring corporate level tax. Similarly, the limitation could cause our TRSs to have greater taxable income and thus potentially greater corporate tax liability.

Recordkeeping Requirements

The Company is required to maintain certain records under the REIT rules. In addition, to avoid a monetary penalty, the Company must request on an annual basis information from our stockholders designed to disclose the actual ownership of its outstanding shares of beneficial interest. The Company intends to continue to comply with these requirements.

Foreign Investments

The Company and its subsidiaries have acquired, and expect to acquire in the future, investments in foreign countries that will require it to pay taxes to foreign countries. Taxes that the Company pays in foreign jurisdictions may not be passed through to, or used by, our stockholders as a foreign tax credit or otherwise. The Company could be subject to U.S. federal income tax rules intended to prevent or minimize the value of the deferral of the recognition by it of passive-type income of foreign entities in which it owns a direct or indirect interest. As a result, the Company could be required to recognize taxable income for U.S. federal income tax purposes prior to receiving cash distributions with respect to that income or, in certain circumstances, pay an interest charge on U.S. federal income tax that it is deemed to have deferred. The Company’s foreign investments might also generate foreign currency gains and losses. Certain foreign currency gains may be excluded from gross income for purposes of one or both of the gross income tests, as discussed above. Refer above to the section entitled “—Requirements for Qualification—Gross Income Tests.”

Failure to Qualify

If the Company fails to satisfy one or more requirements for REIT qualification, other than the gross income tests and the asset tests, it could avoid disqualification if its failure is due to reasonable cause and not to willful neglect and the Company pays a penalty of $50,000 for each such failure. In addition, there are relief provisions for a failure of the gross income tests and asset tests, as described in the sections entitled “—Gross Income Tests—Failure to Satisfy the Gross Income Tests” and “—Asset Tests—Failure to Satisfy the Asset Tests.”

If the Company fails to qualify as a REIT in any taxable year, and no relief provision applies, it would be subject to U.S. federal income tax and any applicable alternative minimum tax (only for its taxable year ended December 31, 2017) on its taxable income at regular corporate rates. In calculating its taxable income in a year in which it fails to qualify as a REIT, the Company would not be able to deduct amounts paid out to stockholders. In fact, the Company would not be required to distribute any amounts to stockholders in that year. In such event, to the extent of the Company’s current and accumulated earnings and profits, distributions to most stockholders taxed at individual rates would generally be taxable at capital gains tax rates. For taxable years beginning after December 31, 2017, and before January 1, 2026, generally U.S. stockholders that are individuals, trusts or estates may deduct 20% of the aggregate amount of ordinary dividends distributed by us, subject to certain limitations. Alternatively, such dividends paid to U.S. stockholders that are individuals, trusts and estates may be taxable at the preferential income tax rates (i.e., the 20% maximum U.S. federal rate) for qualified dividends. In addition, subject to the limitations of the Code, corporate distributees may be eligible for the dividends-received deduction.

Unless the Company qualified for relief under specific statutory provisions, it also would be disqualified from taxation as a REIT for the four taxable years following the year during which it ceased to qualify as a REIT. The Company cannot predict whether in all circumstances it would qualify for such statutory relief. In addition, the rule against re-electing REIT

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status following a loss of such status could also apply to the Company if it were determined that Colony or NRF failed to qualify as REITs and the Company were treated as a successor to Colony Capital Inc. or NorthStar Realty Finance Corp., as applicable.

Taxation of Taxable U.S. Stockholders of Colony Capital

The term “U.S. stockholder” means a beneficial owner of our stock that for U.S. federal income tax purposes is:

•a citizen or resident of the United States;

•a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any of its states or the District of Columbia;

•an estate whose income is subject to U.S. federal income taxation regardless of its source; or

•a trust if: (i) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of the trust; or (ii) it has a valid election in place to be treated as a U.S. person.

If a partnership (or other entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our stock, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. If you are a partner in a partnership holding our stock, you should consult your tax advisor regarding the consequences of the purchase, ownership and disposition of our stock by the partnership.

Taxation of U.S. Stockholders on Distributions on Our Stock

As long as the Company qualifies as a REIT, a taxable U.S. stockholder must generally take into account as ordinary income distributions made out of the Company’s current or accumulated earnings and profits that the Company does not designate as capital gain dividends or retained long-term capital gain. However, for tax years prior to 2026, generally U.S. stockholders that are individuals, trusts or estates may deduct 20% of the aggregate amount of ordinary dividends distributed by us, subject to certain limitations. For purposes of determining whether a distribution is made out of its current or accumulated earnings and profits, the Company’s earnings and profits will be allocated first to its preferred stock dividends and then to its common stock dividends.

Dividends paid to U.S. stockholders will not qualify for the dividends-received deduction generally available to corporations. In addition, dividends paid to a U.S. stockholder generally will not qualify for the 20% tax rate for qualified dividend income. The maximum tax rate for qualified dividend income is 20%. Qualified dividend income generally includes dividends paid to U.S. stockholders taxed at individual rates by domestic C corporations and certain qualified foreign corporations. Because the Company will not generally be subject to U.S. federal income tax on the portion of its REIT taxable income distributed to our stockholders (refer above to the section entitled “—Taxation of Colony Capital”), its dividends generally will not be eligible for the 20% rate on qualified dividend income. As a result, the Company’s ordinary REIT dividends will be taxed at the higher tax rate applicable to ordinary income, which is currently a maximum rate of 37%. However, the 20% tax rate for qualified dividend income will apply to the Company’s ordinary REIT dividends to the extent attributable: (i) to income retained by it in a prior non-REIT taxable year in which it or a predecessor was subject to corporate income tax (less the amount of tax); (ii) to dividends received by it from non-REIT corporations, such as domestic TRSs; and (iii) to the extent attributable to income upon which it has paid corporate income tax (e.g., to the extent that the Company distributes less than 100% of its net taxable income). In general, to qualify for the reduced tax rate on qualified dividend income, a stockholder must hold our stock for more than 60 days during the 121-day period beginning on the date that is 60 days before the date on which our stock becomes ex-dividend. In addition, dividends paid to certain individuals, trusts and estates whose income exceeds certain thresholds are subject to a 3.8% Medicare tax.

A U.S. stockholder generally will take into account as long-term capital gain any distributions that the Company designates as capital gain dividends without regard to the period for which the U.S. stockholder has held our stock. The Company generally will designate its capital gain dividends as either 20% or 25% rate distributions. Refer below to the section entitled “—Capital Gains and Losses.” A corporate U.S. stockholder, however, may be required to treat up to 20% of certain capital gain dividends as ordinary income.

The Company may elect to retain and pay income tax on the net long-term capital gain that it receives in a taxable year. In that case, to the extent that the Company designates such amount in a timely notice to such stockholder, a U.S. stockholder would be treated as receiving its proportionate share of the Company’s undistributed long-term capital gain and would receive a credit for its proportionate share of the tax the Company paid. The U.S. stockholder would increase the basis in its stock by the amount of its proportionate share of the Company’s undistributed long-term capital gain, minus its share of the tax the Company paid.

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To the extent that the Company makes a distribution in excess of its current and accumulated earnings and profits, such distribution will not be taxable to a U.S. stockholder to the extent that it does not exceed the adjusted tax basis of the U.S. stockholder’s stock. Instead, such distribution will reduce the adjusted tax basis of such stock. To the extent that the Company makes a distribution in excess of both its current and accumulated earnings and profits and the U.S. stockholder’s adjusted tax basis in its stock, such stockholder will recognize long-term capital gain or short-term capital gain if the stock has been held for one year or less, assuming the stock is a capital asset in the hands of the U.S. stockholder. In addition, if the Company declares a distribution in October, November or December of any year that is payable to a U.S. stockholder of record on a specified date in any such month, such distribution shall be treated as both paid by the Company and received by the U.S. stockholder on December 31 of such year, provided that the Company actually pays the distribution during January of the following calendar year.

Stockholders may not include in their individual income tax returns any of the Company’s net operating losses or capital losses. Instead, the Company would carry over such losses for potential offset against the Company’s future income. Under amendments made by H.R. 1 to Section 172 of the Code, the Company’s deduction for any net operating loss carryforwards arising from losses it sustains in taxable years beginning after December 31, 2017, is limited to 80% of its REIT taxable income (determined without regard to the deduction for dividends paid), and any unused portion of losses arising in taxable years ending after December 31, 2017, may not be carried back, but may be carried forward indefinitely.

Taxable distributions from the Company and gain from the disposition of our stock will not be treated as passive activity income, and, therefore, stockholders generally will not be able to apply any “passive activity losses,” such as losses from certain types of limited partnerships in which the stockholder is a limited partner, against such income. In addition, taxable distributions from the Company and gain from the disposition of our stock generally may be treated as investment income for purposes of the investment interest limitations (although any capital gains so treated will not qualify for the lower 20% tax rate applicable to capital gains of U.S. stockholders taxed at individual rates). The Company will notify stockholders after the close of the Company’s taxable year as to the portions of its distributions attributable to that year that constitute ordinary income, return of capital and capital gain.

Distributions to Holders of Depositary Shares. Owners of depositary shares will be treated for U.S. federal income tax purposes as if they were owners of the underlying preferred stock represented by such depositary shares. Accordingly, such owners will be entitled to take into account, for U.S. federal income tax purposes, income and deductions to which they would be entitled if they were direct holders of the underlying preferred shares. In addition, (1) no gain or loss will be recognized for U.S. federal income tax purposes upon the withdrawal of certificates evidencing the underlying preferred stock in exchange for depositary receipts, (2) the tax basis of each share of the underlying preferred stock to an exchanging owner of depositary shares will, upon such exchange, be the same as the aggregate tax basis of the depositary shares exchanged therefore, and (3) the hold period for the underlying preferred stock in the hands of an exchanging owner of depositary shares will include the period during which such person owned such depositary shares.

Taxation of U.S. Stockholders on the Disposition of Our Stock

In general, a U.S. stockholder who is not a dealer in securities must treat any gain or loss realized upon a taxable disposition of our stock as long-term capital gain or loss if the U.S. stockholder has held the stock for more than one year and otherwise as short-term capital gain or loss. However, a U.S. stockholder must treat any loss upon a sale or exchange of stock held by such stockholder for six months or less as a long-term capital loss to the extent of any actual or deemed distributions from the Company that such U.S. stockholder previously has characterized as long-term capital gain. All or a portion of any loss that a U.S. stockholder realizes upon a taxable disposition of the stock may be disallowed if the U.S. stockholder purchases other substantially identical 264 shares of our stock within 30 days before or after the disposition (in which case, the basis of the shares acquired would be adjusted to reflect the disallowed loss).

Taxation of U.S. Stockholders on a Redemption of Preferred Stock and Depositary Shares

A redemption of the Company’s preferred stock and depositary shares will be treated under Section 302 of the Code as a distribution that is taxable as dividend income (to the extent of its current or accumulated earnings and profits), unless the redemption satisfies certain tests set forth in Section 302(b) of the Code enabling the redemption to be treated as a sale of the preferred stock or depositary shares (in which case the redemption will be treated in the same manner as a sale described above in the section entitled “—Taxation of U.S. Stockholders on the Disposition of Our Stock”). The redemption will satisfy such tests if it: (i) is “substantially disproportionate” with respect to the U.S. stockholder’s interest in our stock; (ii) results in a “complete termination” of the U.S. stockholder’s interest in all classes of our stock; or (iii) is “not essentially equivalent to a dividend” with respect to the stockholder, all within the meaning of Section 302(b) of the Code. In determining whether any of these tests have been met, stock considered to be owned by the holder by reason of certain constructive ownership rules set forth in the Code, as well as stock actually owned, generally must be taken into account. Because the determination as to whether any of the three alternative tests of Section 302(b) of the Code described above will be satisfied with respect to any particular U.S. stockholder of the preferred stock or depositary shares

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depends upon the facts and circumstances at the time that the determination must be made, prospective investors are urged to consult their tax advisors to determine such tax treatment. If a redemption of the Company’s preferred stock or depositary shares does not meet any of the three tests described above, the redemption proceeds will be treated as a distribution, as described above in the section entitled “—Taxation of U.S. Stockholders on Distributions on Our Stock.” In that case, a U.S. stockholder’s adjusted tax basis in the redeemed preferred stock or depositary shares will be transferred to such U.S. stockholder’s remaining stock holdings in the Company. If the U.S. stockholder does not retain any of the Company’s shares, such basis could be transferred to a related person that holds our stock or it may be lost.

Under proposed Treasury Regulations, if any portion of the amount received by a U.S. stockholder on a redemption of any class of the Company’s preferred stock or depositary shares is treated as a distribution with respect to our stock but not as a taxable dividend, then such portion will be allocated to all stock of the redeemed class held by the redeemed stockholder just before the redemption on a pro-rata, share-by-share, basis. The amount applied to each share will first reduce the redeemed U.S. stockholder’s basis in that share and any excess after the basis is reduced to zero will result in taxable gain. If the redeemed stockholder has different bases in its shares, then the amount allocated could reduce some of the basis in certain shares while reducing all the basis and giving rise to taxable gain in others. Thus, the redeemed U.S. stockholder could have gain even if such U.S. stockholder’s basis in all its shares of the redeemed class exceeded such portion.

The proposed Treasury Regulations permit the transfer of basis in the redeemed preferred or depositary shares to the redeemed U.S. stockholder’s remaining, unredeemed preferred or depositary shares of the same class, if any, but not to any other class of shares held, directly or indirectly, by the redeemed U.S. stockholder. Instead, any unrecovered basis in the redeemed preferred or depositary shares would be treated as a deferred loss to be recognized when certain conditions are satisfied. The proposed Treasury Regulations would be effective for transactions that occur after the date the regulations are published as final Treasury Regulations. There can, however, be no assurance as to whether, when and in what particular form such proposed Treasury Regulations will ultimately be finalized.

Capital Gains and Losses

A taxpayer generally must hold a capital asset for more than one year for gain or loss derived from its sale or exchange to be treated as long-term capital gain or loss. The highest marginal individual income tax rate is currently 37%. However, the maximum tax rate on long-term capital gain applicable to U.S. stockholders taxed at individual rates is 20%. The maximum tax rate on long-term capital gain from the sale or exchange of “Section 1250 property,” which we refer to as depreciable real property, is 25% computed on the lesser of the total amount of the gain or the accumulated Section 1250 depreciation. In addition, capital gains recognized by certain individuals, trusts and estates whose income exceeds certain thresholds are subject to a 3.8% Medicare tax. With respect to distributions that the Company designates as capital gain dividends and any retained capital gain that it is deemed to distribute, the Company generally may designate whether such a distribution is taxable to its U.S. stockholders taxed at individual rates at a 20% or 25% rate. Thus, the tax rate differential between capital gain and ordinary income for those taxpayers may be significant. In addition, the characterization of income as capital gain or ordinary income may affect the deductibility of capital losses. A non-corporate taxpayer may deduct capital losses not offset by capital gains against its ordinary income only up to a maximum annual amount of $3,000. A non-corporate taxpayer may carry forward unused capital losses indefinitely. A corporate taxpayer must pay tax on its net capital gain at ordinary corporate rates. A corporate taxpayer may deduct capital losses only to the extent of capital gains, with unused losses being carried back three years and forward five years.

Expansion of Medicare Tax

The Health Care and Reconciliation Act of 2010 requires that, in certain circumstances, certain U.S. holders that are individuals, estates, and trusts pay a 3.8% tax on “net investment income,” which includes, among other things, dividends on and gains from the sale or other disposition of REIT shares. The temporary 20% deduction allowed by Section 199A of the Code, as added by H.R. 1, with respect to ordinary REIT dividends received by non-corporate taxpayers is allowed only for purposes of Chapter 1 of the Code and thus is apparently not allowed as a deduction allocable to such dividends for purposes of determining the amount of net investment income subject to the 3.8% Medicare tax, which is imposed under Chapter 2A of the Code. Prospective investors should consult their own tax advisors regarding this legislation.

Taxation of Tax-Exempt Stockholders

Tax-exempt entities, including qualified employee pension and profit-sharing trusts and individual retirement accounts and annuities, generally are exempt from U.S. federal income taxation. However, they are subject to taxation on their unrelated business taxable income, which we refer to as UBTI. While many investments in real estate generate UBTI, the IRS has issued a published ruling that dividend distributions from a REIT to an exempt employee pension trust do not constitute UBTI, provided that the exempt employee pension trust does not otherwise use the shares of the REIT in an unrelated trade or business of the pension trust. Based on that ruling, amounts that the Company distributes to tax-

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exempt stockholders generally should not constitute UBTI. However, if a tax-exempt stockholder were to finance its investment in our stock with debt, a portion of the income that it receives from the Company would constitute UBTI pursuant to the “debt-financed property” rules. Furthermore, social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and qualified group legal services plans that are exempt from taxation under special provisions of the U.S. federal income tax laws are subject to different UBTI rules, which generally will require them to characterize distributions that they receive from the Company as UBTI. Finally, in certain circumstances, a qualified employee pension or profit-sharing trust that owns more than 10% of our stock is required to treat a percentage of the dividends that it receives from the Company as UBTI if the Company is a “pension-held REIT.” Such percentage is equal to the gross income that the Company derives from an unrelated trade or business, determined as if the Company were a pension trust, divided by the Company’s total gross income for the year in which the Company pays the dividends. That rule applies to a pension trust holding more than 10% of our stock only if:

•the percentage of the Company’s dividends that the tax-exempt trust would be required to treat as UBTI is at least 5%;

•the Company qualifies as a REIT by reason of the modification of the rule requiring that no more than 50% of our stock be owned by five or fewer individuals that allows the beneficiaries of the pension trust to be treated as holding our stock in proportion to its actuarial interests in the pension trust (refer to the section entitled “—Requirements for Qualification”); and

•either: (i) one pension trust owns more than 25% of the value of our stock; or (ii) a group of pension trusts individually holding more than 10% of the value of our stock collectively owns more than 50% of the value of our stock.

Taxation of Non-U.S. Stockholders

The term “non-U.S. stockholder” means a beneficial owner of our stock that is not a U.S. stockholder or a partnership (or other entity or arrangement treated as a partnership for U.S. federal income tax purposes). The rules governing U.S. federal income taxation of non-U.S. stockholders are complex. This section is only a summary of such rules. Non-U.S. stockholders are urged to consult their tax advisors to determine the impact of U.S. federal, state, local and foreign income tax laws on the ownership of our stock, including any reporting requirements.

A non-U.S. stockholder that receives a distribution that is not attributable to gain from the Company’s sale or exchange of a “United States real property interest,” which we refer to as USRPI, and that the Company does not designate as a capital gain dividend or retained capital gain, will recognize ordinary income to the extent that the Company pays such distribution out of its current or accumulated earnings and profits. A withholding tax equal to 30% of the gross amount of the distribution ordinarily will apply to such distribution unless an applicable tax treaty reduces or eliminates the tax. If a distribution is treated as effectively connected with the non-U.S. stockholder’s conduct of a U.S. trade or business, the non-U.S. stockholder generally will be subject to U.S. federal income tax on the distribution at graduated rates, in the same manner as U.S. stockholders are taxed with respect to such distribution, and a non-U.S. stockholder that is a corporation also may be subject to the 30% branch profits tax with respect to the distribution. The Company plans to withhold U.S. income tax at the rate of 30% on the gross amount of any such distribution paid to a non-U.S. stockholder unless either:

•a lower treaty rate applies and the non-U.S. stockholder provides an IRS Form W-8BEN or W-8BEN-E to the Company evidencing eligibility for that reduced rate; or

•the non-U.S. stockholder files an IRS Form W-8ECI with the Company claiming that the distribution is effectively connected income.

A non-U.S. stockholder will not incur tax on a distribution in excess of the Company’s current and accumulated earnings and profits if the excess portion of such distribution does not exceed the stockholder’s adjusted basis of its stock. Instead, the excess portion of such distribution will reduce the adjusted basis of such stock. A non-U.S. stockholder will be subject to tax on a distribution that exceeds both the Company’s current and accumulated earnings and profits and the stockholder’s adjusted basis of its stock, if the non-U.S. stockholder otherwise would be subject to tax on gain from the sale or disposition of its stock, as described below. Because the Company generally cannot determine at the time it makes a distribution whether the distribution will exceed its current and accumulated earnings and profits, the Company normally will withhold tax on the entire amount of any distribution at the same rate as it would withhold on a dividend. However, a non-U.S. stockholder may claim a refund of amounts that the Company withholds if the Company later determines that a distribution in fact exceeded the Company’s current and accumulated earnings and profits.

If the Company is treated as a “United States real property holding corporation,” as described below, it will be required to withhold 15% of any distribution that exceeds its current and accumulated earnings and profits. Consequently,

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although the Company intends to withhold at a rate of 30% on the entire amount of any distribution, to the extent that it does not do so, the Company may withhold at a rate of 15% on any portion of a distribution not subject to withholding at a rate of 30%.

For any year in which the Company qualifies as a REIT, a non-U.S. stockholder will incur tax on distributions that are attributable to gain from the Company’s sale or exchange of a USRPI under the Foreign Investment in Real Property Tax Act of 1980, which we refer to as FIRPTA. A USRPI includes certain interests in real property and stock in “United States real property holding corporations,” which are corporations at least 50% of whose assets consist of interests in real property. Under FIRPTA, a non-U.S. stockholder is taxed on distributions attributable to gain from sales of USRPIs as if such gain were effectively connected with a U.S. business of the non-U.S. stockholder. A non-U.S. stockholder thus would be taxed on such a distribution at the normal capital gains rates applicable to U.S. stockholders, subject to applicable alternative minimum tax and a special alternative minimum tax in the case of a nonresident alien individual. A non-U.S. corporate stockholder not entitled to treaty relief or an exemption also may be subject to the 30% branch profits tax on such a distribution. The Company must withhold 21% of any distribution that it could designate as a capital gain dividend. A non-U.S. stockholder may receive a credit against its tax liability for the amount the Company withholds.

Capital gain distributions to a non-U.S. stockholder that are attributable to the Company’s sale of real property will be treated as ordinary dividends rather than as gain from the sale of a USRPI, as long as: (i)(A) such class of our stock is “regularly traded” on an established securities market in the United States; and (B) the non-U.S. stockholder did not own more than 10% of the applicable class of our stock at any time during the one-year period prior to the distribution; or (ii) the non-U.S. stockholder was treated as a “qualified shareholder” as discussed below. As a result, non-U.S. stockholders owning 10% or less of the applicable class of our stock that is “regularly traded” generally will be subject to withholding tax on such capital gain distributions in the same manner as they are subject to withholding tax on ordinary dividends. If a class of our stock is not regularly traded on an established securities market in the United States or the non-U.S. stockholder owned more than 10% of our stock at any time during the one-year period prior to the distribution, capital gain distributions that are attributable to the Company’s sale of real property would be subject to tax under FIRPTA, as described in the preceding paragraph. Moreover, if a non-U.S. stockholder disposes of our stock during the 30-day period preceding a dividend payment, and such non-U.S. stockholder (or a person related to such non-U.S. stockholder) acquires or enters into a contract or option to acquire our stock within 61 days of the first day of the 30-day period described above, and any portion of such dividend payment would, but for the disposition, be treated as a USRPI capital gain to such non-U.S. stockholder, then such non-U.S. stockholder shall be treated as having USRPI capital gain in an amount that, but for the disposition, would have been treated as USRPI capital gain.

Although the law is not clear on the matter, it appears that amounts the Company designates as retained capital gains in respect of the stock held by U.S. stockholders generally should be treated with respect to non-U.S. stockholders in the same manner as actual distributions by the Company of capital gain dividends. Under this approach, a non-U.S. stockholder would be able to offset as a credit against its U.S. federal income tax liability its proportionate share of the tax paid by the Company on such retained capital gains, and to receive from the IRS a refund to the extent the non-U.S. stockholder’s proportionate share of such tax paid by the Company exceeds its actual U.S. federal income tax liability, provided that the non-U.S. stockholder furnishes required information to the IRS on a timely basis, which may require the filing of a tax return with the IRS.

A non-U.S. stockholder generally will not incur tax under FIRPTA with respect to gain realized upon a disposition of our stock as long as the Company: (i) is not a “United States real property holding corporation” during a specified testing period; or (ii) is a domestically controlled qualified investment entity. A domestically controlled qualified investment entity includes a REIT, less than 50% of the value of which is held directly or indirectly by foreign persons at all times during a specified testing period. The Company believes that it will be a domestically controlled qualified investment entity, but because our stock will be publicly traded, it cannot assure you that it in fact will be a domestically controlled qualified investment entity. However, even if the Company were a “United States real property holding corporation” and it were not a domestically controlled qualified investment entity, a non-U.S. stockholder that owned, actually or constructively, 10% or less of the applicable class of our stock at all times during a specified testing period would not incur tax under FIRPTA if that class of our stock is “regularly traded” on an established securities market. Because the Company expects that its common and preferred stock will be regularly traded on an established securities market, a non-U.S. stockholder will not incur tax under FIRPTA with respect to any such gain unless it owns, actually or constructively, more than 10% of the applicable class of our stock. If the gain on the sale of our stock were taxed under FIRPTA, a non-U.S. stockholder would be taxed in the same manner as U.S. stockholders with respect to such gain, subject to applicable alternative minimum tax or a special alternative minimum tax in the case of nonresident alien individuals. Furthermore, a non-U.S. stockholder will incur tax on gain not subject to FIRPTA if: (i) the gain is effectively connected with the non-U.S. stockholder’s U.S. trade or business, in which case the non-U.S. stockholder will be subject to the same treatment as U.S. stockholders with respect to such gain; or (ii) the non-U.S. stockholder is a nonresident alien individual who was present in the United States

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for 183 days or more during the taxable year and has a “tax home” in the United States, in which case the non-U.S. stockholder will incur a 30% tax on his capital gains.

Qualified Shareholders

Subject to the exception discussed below, any distribution to a “qualified shareholder,” as defined below, who holds our stock directly or indirectly (through one or more partnerships) will not be subject to U.S. tax as income effectively connected with a U.S. trade or business and thus will not be subject to special withholding rules under FIRPTA. While a “qualified shareholder” will not be subject to FIRPTA withholding on REIT distributions, certain investors of a “qualified shareholder” (i.e., non-U.S. persons who hold interests in the “qualified shareholder” (other than interests solely as a creditor), and hold more than 10% of our stock (whether or not by reason of the investor’s ownership in the “qualified shareholder”)) may be subject to FIRPTA withholding.

In addition, a sale of our stock by a “qualified shareholder” who holds such stock directly or indirectly (through one or more partnerships) will not be subject to U.S. federal income taxation under FIRPTA. As with distributions, certain investors of a “qualified shareholder” (i.e., non-U.S. persons who hold interests in the “qualified shareholder” (other than interests solely as a creditor), and hold more than 10% of our stock (whether or not by reason of the investor’s ownership in the “qualified shareholder”)) may be subject to FIRPTA withholding on a sale of our stock.

A “qualified shareholder” is a foreign person that: (i) either is eligible for the benefits of a comprehensive income tax treaty which includes an exchange of information program and whose principal class of interests is listed and regularly traded on one or more recognized stock exchanges (as defined in such comprehensive income tax treaty), or is a foreign partnership that is created or organized under foreign law as a limited partnership in a jurisdiction that has an agreement for the exchange of information with respect to taxes with the United States and has a class of limited partnership units representing greater than 50% of the value of all the partnership units that are regularly traded on the NYSE or NASDAQ markets; (ii) is a qualified collective investment vehicle, as defined below; and (iii) maintains records on the identity of each person who, at any time during the foreign person’s taxable year, is the direct owner of 5% or more of the class of interests or units, as applicable, described in (i), above.

A qualified collective investment vehicle is a foreign person that: (i) would be eligible for a reduced rate of withholding under the comprehensive income tax treaty described above, even if such entity holds more than 10% of the stock of such REIT; (ii) is publicly traded, is treated as a partnership under the Code, is a withholding foreign partnership, and would be treated as a “United States real property holding corporation” if it were a domestic corporation; or (iii) is designated as such by the Secretary of the Treasury and is either (A) fiscally transparent within the meaning of Section 894 of the Code or (B) required to include dividends in its gross income, but is entitled to a deduction for distributions to its investors.

Qualified Foreign Pension Funds

Any distribution to a “qualified foreign pension fund” (or an entity all of the interests of which are held by a “qualified foreign pension fund”) who holds our stock directly or indirectly (through one or more partnerships) will not be subject to U.S. tax as income effectively connected with a U.S. trade or business and thus will not be subject to special withholding rules under FIRPTA. In addition, a sale of our stock by a “qualified foreign pension fund” that holds such stock directly or indirectly (through one or more partnerships) will not be subject to U.S. federal income taxation under FIRPTA.

A qualified foreign pension fund is any trust, corporation or other organization or arrangement: (i) which is created or organized under the law of a country other than the United States; (ii) which is established to provide retirement or pension benefits to participants or beneficiaries that are current or former employees (or persons designated by such employees) of one or more employers in consideration for services rendered; (iii) which does not have a single participant or beneficiary with a right to more than 5% of its assets or income; (iv) which is subject to government regulation and provides annual information reporting about its beneficiaries to the relevant tax authorities in the country in which it is established or operates; and (v) with respect to which, under the laws of the country in which it is established or operates, (A) contributions to such organization or arrangement that would otherwise be subject to tax under such laws are deductible or excluded from the gross income of such entity or taxed at a reduced rate or (B) taxation of any investment income of such organization or arrangement is deferred or such income is taxed at a reduced rate.

FATCA Withholding

Under the Foreign Account Tax Compliance Act, which we refer to as FATCA, a U.S. withholding tax at a 30% rate will be imposed on dividends paid on our stock received by certain non-U.S. stockholders if certain disclosure requirements related to U.S. accounts or ownership are not satisfied. In addition, if those disclosure requirements are not satisfied, a U.S. withholding tax at a 30% rate will be imposed on proceeds from the sale of our stock received after December 31, 2018 by certain non-U.S. stockholders (subject to the proposed Treasury Regulations discussed below). If payment of withholding taxes is required, non-U.S. stockholders that are otherwise eligible for an exemption from, or

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reduction of, U.S. withholding taxes with respect to such dividends and proceeds will be required to seek a refund from the IRS to obtain the benefit of such exemption or reduction. The Company will not pay any additional amounts in respect of any amounts withheld.

While withholding under FATCA would have applied to payments of gross proceeds from the sale or disposition of our stock received after December 31, 2018, proposed Treasury Regulations eliminate FATCA withholding on payments of gross proceeds entirely. Taxpayers generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued.

Information Reporting Requirements and Backup Withholding; Shares Held Offshore

The Company will report to its stockholders and to the IRS the amount of distributions it pays during each calendar year, and the amount of tax it withholds, if any. Under the backup withholding rules, a stockholder may be subject to backup withholding at a rate of 28% with respect to distributions unless the holder:

•is a corporation or qualifies for certain other exempt categories and, when required, demonstrates this fact; or

•provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding, and otherwise complies with the applicable requirements of the backup withholding rules.

A stockholder who does not provide the Company with its correct taxpayer identification number also may be subject to penalties imposed by the IRS. Any amount paid as backup withholding will be creditable against the stockholder’s income tax liability. In addition, the Company may be required to withhold a portion of capital gain distributions to any U.S. stockholders who fail to certify their non-foreign status to the Company.

Backup withholding will generally not apply to payments of dividends made by the Company or its paying agents, in their capacities as such, to a non-U.S. stockholder, provided that the non-U.S. stockholder furnishes to the Company or its paying agent the required certification as to its non-U.S. status, such as providing a valid IRS Form W-8BEN, W-8BEN-E or W-8ECI, or certain other requirements are met. Notwithstanding the foregoing, backup withholding may apply if either the Company or its paying agent has actual knowledge, or reason to know, that the holder is a U.S. person that is not an exempt recipient. Payments of the net proceeds from a disposition or a redemption effected outside the United States by a non-U.S. stockholder made by or through a foreign office of a broker generally will not be subject to information reporting or backup withholding. However, information reporting (but not backup withholding) generally will apply to such a payment if the broker has certain connections with the U.S. unless the broker has documentary evidence in its records that the beneficial owner is a non-U.S. stockholder and specified conditions are met or an exemption is otherwise established. Payment of the net proceeds from a disposition by a non-U.S. stockholder of our stock made by or through the U.S. office of a broker is generally subject to information reporting and backup withholding unless the non-U.S. stockholder certifies under penalties of perjury that it is not a U.S. person and satisfies certain other requirements or otherwise establishes an exemption from information reporting and backup withholding.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against the stockholder’s U.S. federal income tax liability if certain required information is furnished to the IRS. Stockholders are urged to consult their own tax advisors regarding application of backup withholding to them and the availability of, and procedure for obtaining an exemption from, backup withholding.

Under FATCA, a U.S. withholding tax at a 30% rate will be imposed on dividends paid on our stock received by U.S. stockholders who own their stock through foreign accounts or foreign intermediaries if certain disclosure requirements related to U.S. accounts or ownership are not satisfied. In addition, if those disclosure requirements are not satisfied, a U.S. withholding tax at a 30% rate will be imposed on proceeds from the sale of our stock received after December 31, 2018 by U.S. stockholders who own their shares through foreign accounts or foreign intermediaries. The Company will not pay any additional amounts in respect of any amounts withheld.

Other Tax Consequences

Tax Aspects of Colony Capital’s Investments in the Operating Partnership and the Subsidiary Partnerships

The following discussion summarizes certain U.S. federal income tax considerations applicable to the Company’s direct or indirect investments in the Company’s Operating Partnership and any subsidiary partnerships or limited liability companies that the Company forms or acquires interests in and that are treated as partnerships for U.S. federal income tax purposes, which we refer to, individually, as a Partnership and, collectively, as the Partnerships. The discussion does not cover state or local tax laws or any U.S. federal tax laws other than income tax laws. The Company will include in its income its proportionate share of Partnership items of income, gain, loss, deduction or credit for purposes of the REIT income tests, and will include its proportionate share of assets held by the Partnerships based on its capital interest in such partnerships (other than for purposes of the 10% value test, for which the determination of our interest in partnership

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assets will be based on our proportionate interest in any securities issued by the partnership, other than certain securities specifically excluded under the Code). The Company’s capital interest in a Partnership is calculated based on either the Company’s percentage ownership of the capital of the Partnership or based on the allocations provided in the applicable partnership or limited liability company operating agreement, using the more conservative calculation. Consequently, to the extent that the Company holds an equity interest in a Partnership, the Partnership’s assets and operations may affect its ability to qualify as a REIT, even though the Company may have no control, or have only limited influence, over the Partnership.

Classification as Partnerships. The Company is entitled to include in its income its distributive share of each Partnership’s income and to deduct its distributive share of each Partnership’s losses only if such Partnership is classified for U.S. federal income tax purposes as a partnership (or an entity that is disregarded for U.S. federal income tax purposes if the entity has only one owner or member) rather than as a corporation or an association taxable as a corporation. An unincorporated domestic entity with at least two owners or members will be classified as a partnership, rather than as a corporation, for U.S. federal income tax purposes if it:

•is treated as a partnership under the Treasury Regulations relating to entity classification or the check-the-box regulations, as described below; and

•is not a “publicly traded” partnership, as defined below.

Under the check-the-box regulations, an unincorporated domestic entity with at least two owners or members may elect to be classified either as an association taxable as a corporation or as a partnership. If such an entity fails to make an election, it generally will be treated as a partnership (or as an entity that is disregarded for U.S. federal income tax purposes if the entity has only one owner or member) for U.S. federal income tax purposes. Each Partnership intends to be classified as a partnership for U.S. federal income tax purposes and no Partnership will elect to be treated as an association taxable as a corporation under the check-the-box regulations.

A publicly traded partnership is a partnership whose interests are traded on an established securities market or are readily tradable on a secondary market or the substantial equivalent thereof. A publicly traded partnership will not, however, be treated as a corporation for any taxable year if, for each taxable year beginning after December 31, 1987 in which it was classified as a publicly traded partnership, 90% or more of the partnership’s gross income for such year consists of certain passive-type income, including real property rents, gains from the sale or other disposition of real property, interest and dividends, or the 90% passive income exception. Treasury Regulations provide additional limited safe harbors from the definition of a publicly traded partnership. Pursuant to the private placement exclusion safe harbor, interests in a partnership will not be treated as readily tradable on a secondary market or the substantial equivalent thereof if: (i) all interests in the partnership were issued in a transaction or transactions that were not required to be registered under the Securities Act; and (ii) the partnership does not have more than 100 partners at any time during the partnership’s taxable year. In determining the number of partners in a partnership, a person owning an interest in a partnership, grantor trust or S corporation that owns an interest in the partnership is treated as a partner in such partnership only if: (i) substantially all of the value of the owner’s interest in the entity is attributable to the entity’s direct or indirect interest in the partnership; and (ii) a principal purpose of the use of the entity is to permit the partnership to satisfy the 100-partner limitation. Each Partnership is expected to qualify for treatment as a partnership for U.S. federal income tax purposes pursuant to the 90% passive income exception or the private placement safe harbor. The Company has not requested, and does not intend to request, a ruling from the IRS that the Partnerships will be classified as partnerships for U.S. federal income tax purposes.

If, for any reason, a Partnership in which the Company owned more than 10% of the equity were taxable as a corporation, rather than as a partnership, for U.S. federal income tax purposes, the Company likely would not be able to qualify as a REIT unless it qualified for certain relief provisions. Refer to the sections entitled “—Requirements for Qualification—Gross Income Tests” and “—Requirements for Qualification—Asset Tests.” In addition, any change in a Partnership’s status for tax purposes might be treated as a taxable event, in which case the Company might incur tax liability without any related cash distribution. Refer to the section entitled “—Requirements for Qualification—Distribution Requirements.” Further, items of income and deduction of such Partnership would not pass through to its partners, and its partners would be treated as stockholders for tax purposes. Consequently, such Partnership would be required to pay income tax at corporate rates on its net income and distributions to its partners would constitute dividends that would not be deductible in computing such Partnership’s taxable income.

Income Taxation of the Partnerships and their Partners

Partners, Not the Partnerships, Subject to Tax. A partnership generally is not a taxable entity for U.S. federal income tax purposes. Rather, the Company is required to take into account its allocable share of each Partnership’s income, gains, losses, deductions and credits for any taxable year of such Partnership ending within or with the Company’s

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taxable year, without regard to whether the Company has received or will receive any distribution from such Partnership. For taxable years beginning after December 31, 2017, however, the tax liability for adjustments to a Partnership’s tax returns made as a result of an audit by the IRS will be imposed on the Partnership itself in certain circumstances absent an election to the contrary.

Partnership Allocations. Although a partnership agreement generally will determine the allocation of income and losses among partners, such allocations will be disregarded for tax purposes if they do not comply with the provisions of the U.S. federal income tax laws governing partnership allocations. If an allocation is not recognized for U.S. federal income tax purposes, the item subject to the allocation will be reallocated in accordance with the partners’ interests in the partnership, which will be determined by taking into account all of the facts and circumstances relating to the economic arrangement of the partners with respect to such item. Each Partnership’s allocations of taxable income, gain and loss are intended to comply with the requirements of the U.S. federal income tax laws governing partnership allocations.

Tax Allocations With Respect to Contributed Properties. Income, gain, loss and deduction attributable to appreciated or depreciated property that is contributed to a partnership in a tax-deferred transaction or contributed property in exchange for an interest in the partnership must be allocated in a manner such that the contributing partner is charged with, or benefits from, respectively, the unrealized gain or unrealized loss associated with the property at the time of the contribution. The amount of such unrealized gain or unrealized loss, or built-in gain or built-in loss, respectively, is generally equal to the difference between the fair market value of the contributed property at the time of contribution and the adjusted tax basis of such property at the time of contribution, or a book-tax difference. Such allocations are solely for U.S. federal income tax purposes and do not affect the book capital accounts or other economic or legal arrangements among the partners. The U.S. Treasury Department has issued regulations requiring partnerships to use a “reasonable method” for allocating items with respect to which there is a book-tax difference and outlining several reasonable allocation methods.

Basis in Partnership Interest. The Company’s adjusted tax basis in any Partnership generally is equal to:

▪the amount of cash and the basis of any other property contributed by the Company to the Partnership;

▪increased by the Company’s allocable share of the Partnership’s income and its allocable share of indebtedness of the Partnership; and

▪reduced, but not below zero, by the Company’s allocable share of the Partnership’s loss and the amount of cash distributed to the Company and by constructive distributions resulting from a reduction in the Company’s share of indebtedness of the Partnership.

If the allocation of the Company’s distributive share of the Partnership’s loss would reduce the adjusted tax basis of the Company’s partnership interest below zero, the recognition of such loss will be deferred until such time as the recognition of such loss would not reduce the Company’s adjusted tax basis below zero. To the extent that the Partnership’s distributions or any decrease in the Company’s share of the indebtedness of the Partnership, which is considered a constructive cash distribution to the partners, would reduce the Company’s adjusted tax basis below zero, such distributions or decreases will constitute taxable income to the Company. Such distributions and constructive distributions normally will be characterized as long-term capital gain.

Depreciation Deductions Available to Partnerships.

The initial tax basis of property is the amount of cash and the basis of property given as consideration for the property. The Partnership’s initial basis in contributed properties acquired in exchange for units of the Partnership should be the same as the transferor’s basis in such properties on the date of acquisition. Although the law is not entirely clear, the Partnership generally will depreciate such property for U.S. federal income tax purposes over the same remaining useful lives and under the same methods used by the transferors. The Partnership’s tax depreciation deductions will be allocated among the partners in accordance with their respective interests in the Partnership, except to the extent that the Partnership is required under the U.S. federal income tax laws governing partnership allocations to use another method for allocating tax depreciation deductions attributable to contributed or revalued properties, which could result in the Company receiving a disproportionate share of such deductions.

Sale of a Partnership’s Property

Generally, any gain realized by a Partnership on the sale of property held by the Partnership for more than one year will be long-term capital gain, except for any portion of such gain that is treated as depreciation or cost recovery recapture. Any gain or loss recognized by a Partnership on the disposition of contributed properties will be allocated first to the partners of the Partnership who contributed such properties to the extent of their built-in gain or loss on those properties for U.S. federal income tax purposes. The partners’ built-in gain or loss on such contributed properties will equal the difference between the partners’ proportionate share of the book value of those properties and the partners’ tax basis

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allocable to those properties at the time of the contribution. Any remaining gain or loss recognized by the Partnership on the disposition of the contributed properties, and any gain or loss recognized by the Partnership on the disposition of the other properties, will be allocated among the partners in accordance with their respective percentage interests in the Partnership.

The Company’s share of any gain realized by a Partnership on the sale of any property held by the Partnership as inventory or other property held primarily for sale to customers in the ordinary course of the Partnership’s trade or business will be treated as income from a prohibited transaction that is subject to a 100% penalty tax. Such prohibited transaction income also may have an adverse effect upon the Company’s ability to satisfy the income tests for REIT status. Refer to the section entitled “—Requirements for Qualification—Gross Income Tests.” The Company, however, does not presently intend to acquire or hold or to allow any Partnership to acquire or hold any property that represents inventory or other property held primarily for sale to customers in the ordinary course of the Company’s or such Partnership’s trade or business.

Treatment of Depositary Shares

Owners of depositary shares will be treated for U.S. federal income tax purposes as if they were owners of the preferred stock represented by such depositary shares. Accordingly, such owners will be entitled to take into account, for U.S. federal income tax purposes, income and deductions to which they would be entitled if they were holders of such preferred stock. In addition, (i) no gain or loss will be recognized for U.S. federal income tax purposes upon the withdrawal of preferred stock to an exchange owner of depositary shares, (ii) the tax basis of each share of preferred stock to an exchanging owner of depositary shares will, upon such exchange, be the same as the aggregate tax basis of the depositary shares exchanged therefor, and (iii) the hold period for preferred stock in the hands of an exchanging owner of depositary shares will include the period during which such person owned such depositary shares.

Legislative or Other Actions Affecting REITs

The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department. The Company cannot give you any assurances as to whether, or in what form, any proposals affecting REITs or their stockholders will be enacted. Changes to the U.S. federal tax laws and interpretations thereof could adversely affect an investment in the Company’s stock. Stockholders should consult their tax advisors regarding the effect of potential changes to the U.S. federal tax laws and on an investment in our stock.

State, Local and Foreign Taxes

The Company and/or you may be subject to taxation by various states, localities and foreign jurisdictions, including those in which the Company or a stockholder transacts business, owns property or resides. The state, local and foreign tax treatment may differ from the U.S. federal income tax treatment described above. Consequently, you are urged to consult your tax advisors regarding the effect of state, local and foreign tax laws upon an investment in our stock.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by Item 10 is hereby incorporated by reference to the definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after our fiscal year ended December 31, 2020.

Item 11. Executive Compensation.

The information required by Item 11 is hereby incorporated by reference to the definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after our fiscal year ended December 31, 2020.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by Item 12 is hereby incorporated by reference to the definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after our fiscal year ended December 31, 2020.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by Item 13 is hereby incorporated by reference to the definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after our fiscal year ended December 31, 2020.

Item 14. Principal Accountant Fees and Services.

The information required by Item 14 is hereby incorporated by reference to the definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after our fiscal year ended December 31, 2020.

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PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)(1) and (2). Financial Statements and Schedules of Colony Capital, Inc.


Report of Independent Registered Public Accounting Firm						F-2
Consolidated Balance Sheets						F-5
Consolidated Statements of Operations						F-6
Consolidated Statements of Comprehensive Income (Loss)						F-7
Consolidated Statements of Equity						F-8
Consolidated Statements of Cash Flows						F-11
Notes to Consolidated Financial Statements:						F-13
1. Business and Organization						F-13
2. Summary of Significant Accounting Policies						F-14
3. Acquisitions						F-33
4. Real Estate						F-37
5. Loans Receivable						F-40
6. Equity and Debt Investments						F-44
7. Goodwill, Deferred Leasing Costs and Other Intangibles						F-48
8. Assets and Related Liabilities Held for Disposition						F-51
9. Restricted Cash, Other Assets and Other Liabilities						F-52
10. Debt						F-53
11. Derivatives						F-57
12. Fair Value						F-60
13. Variable Interest Entities						F-66
14. Stockholders' Equity						F-68
15. Noncontrolling Interests						F-71
16. Discontinued Operations						F-72
17. Earnings per Share						F-74
18. Fee Income						F-74
19. Equity-Based Compensation						F-76
20. Transactions with Affiliates						F-78
21. Income Taxes						F-81
2 2 . Commitments and Contingencies						F-83
2 3 . Segment Reporting						F-84
2 4 . Supplemental Disclosure of Cash Flow Information						F-88
2 5 . Subsequent Events						F-89
Schedule II—Valuation and Qualifying Accounts						F-90
Schedule III—Real Estate and Accumulated Depreciation						F-91
Schedule IV—Mortgage Loans on Real Estate						F-96

All other schedules are omitted because they are not applicable, or the required information is included in the consolidated financial statements or notes thereto.

(a)(3) Exhibits

The Exhibit Index attached hereto is incorporated by reference under this item.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Colony Capital, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Colony Capital, Inc. (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedules listed in the Index at Item 15 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 1, 2021 expressed an unqualified opinion thereon.

Adoption of New Accounting Standard

As discussed in Note 2 to the consolidated financial statements, the Company changed its method for accounting for financial instruments in 2020 due to the adoption of ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and the related amendments.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.


						Real Estate Impairment
Description of the Matter						As more fully disclosed in Note 4 to the consolidated financial statements, during the year ended December 31, 2020, the Company recorded approximately $1,952 million in impairment losses related to real estate assets classified as held for disposition or sold and real estate assets classified as held for investment that are not expected to be recovered through future undiscounted cash flows. Auditing the Company’s assessment of the recoverability of its real estate assets is highly judgmental due to the significant estimation in assessing the current and estimated future cash flows, the anticipated hold period, and the exit capitalization rates for the Company’s real estate assets.

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How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process to evaluate the recoverability and estimate the fair value of its real estate assets, including controls over management’s development and review of the significant inputs and assumptions used in the estimates. We obtained the Company’s assessments of quantitative and qualitative indicators of impairment for a sample of its real estate assets. To test these assessments, we obtained supporting documentation, and for a sample of properties subject to a quantitative impairment assessment, we obtained supporting documentation to substantiate key inputs used in the assessment, compared the significant assumptions used to estimate future cash flows to current industry and economic trends, and tested the mathematical accuracy of management’s calculations. We also involved our valuation specialists to assist in evaluating the reasonableness of significant assumptions used in the fair value estimate and consistency of such assumptions with external data sources.

						Impairment of Goodwill
Description of the Matter						At December 31, 2020, the Company’s goodwill related to its other segment was $81.6 million. As more fully disclosed in Notes 2 and 7 to the consolidated financial statements, the Company tests goodwill for impairment at the reporting units to which it is assigned at least on an annual basis in the fourth quarter of each year, or more frequently if events or changes in circumstances occur that would more likely than not reduce the fair value of a reporting unit below its carrying value. During the year ended December 31, 2020, the Company recorded impairment of $594 million related to the Other segment. Auditing management’s impairment assessment for goodwill is highly judgmental due to the significant estimation required in determining the fair value of the reporting unit. The fair value estimates are sensitive to significant assumptions including, but not limited to, the impact of the transition to the digital investment management business and the value of Colony Credit Real Estate, Inc. management contract to the Company’s other investment management reporting unit.

How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill impairment review process, including controls over management’s determination and review of the significant assumptions used in the estimate. We obtained supporting documentation to substantiate key inputs used in the assessment, compared the significant assumptions used to estimate future cash flows to Company forecasts and contractual data, performed a sensitivity analysis to evaluate the assumptions that were most significant to the estimate, and tested the mathematical accuracy of management’s calculations. We also involved our valuation specialists to assist in evaluating the reasonableness of significant assumptions used in the fair value estimate and consistency of such assumptions with external data sources.

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						Asset Acquisitions—Recognition of acquired assets and liabilities
Description of the Matter						As more fully discussed in Note 3 to the consolidated financial statements, during the year ended December 31, 2020, the Company completed the acquisitions of Vantage Data Centers’ portfolio of 12 stabilized hyperscale data centers and Zayo Group Holdings, Inc.’s zColo colocation assets for an aggregate purchase price of approximately $2.7 billion plus assumed liabilities. As explained in Notes 2 and 3 to the consolidated financial statements, the transactions were accounted for as asset acquisitions, and as such, the acquired assets, assumed liabilities and noncontrolling interests are recorded at their relative fair values. Auditing the Company’s accounting for the acquisitions was complex due to the significant estimation required by management in determining the relative fair values of the acquired tangible and intangible assets. The significant estimation was primarily due to the judgmental nature of the inputs to the valuation models used to measure the fair value of the tangible and intangible assets as well as the sensitivity of the respective fair values to the underlying assumptions. The Company utilized discounted cash flows, sales comparison, and direct cost approaches to measure the fair value of the acquired tangible and intangible assets. The more significant assumptions utilized included, but were not limited to, market revenues and discount rates. These significant assumptions are forward looking and could be affected by future economic and market conditions.

How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process for determining and reviewing the key inputs and assumptions used in estimating the fair value of acquired tangible and intangible assets, including controls over the Company’s review of the assumptions underlying the fair value analysis, the cash flow projections, and the accuracy of the underlying data used. For example, we tested controls over the determination of the fair value of acquired tangible and intangible assets, including the valuation models and underlying assumptions used to develop such estimates. To test the fair values of acquired tangible and intangible assets used in the purchase price allocation, we performed audit procedures that included, among others, evaluating the valuation methods and significant assumptions used by management, testing the completeness and accuracy of the underlying data supporting the determination of the various inputs, and testing its clerical accuracy. Finally, we involved our valuation specialists to assist in evaluating the methodologies used by the Company, performing procedures to corroborate the reasonableness of the significant assumptions utilized in developing the fair value estimates, and performing corroborative calculations to assess the reasonableness of the acquired tangible and intangible assets.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2009.

Los Angeles, California

March 1, 2021

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COLONY CAPITAL, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)


	December 31, 2020		December 31, 2019
Assets
Cash and cash equivalents	$	703,544	$	1,205,190
Restricted cash	161,919		91,063
Real estate, net	8,727,920		6,218,196
Loans receivable (at fair value at December 31, 2020)	1,295,337		1,566,328
Equity and debt investments ($465,036 and $457,693 at fair value, respectively)	1,737,479		2,313,805
Goodwill	842,929		1,452,891
Deferred leasing costs and intangible assets, net	1,524,968		632,157
Assets held for disposition ($3,332,276 and $4,679,169 held for sale, respectively)	4,105,801		5,743,085
Other assets ($99 and $21,382 at fair value, respectively)	1,017,119		557,989
Due from affiliates	83,544		51,480
Total assets	$	20,200,560	$	19,832,184
Liabilities
Debt, net	$	7,789,738	$	5,517,918
Accrued and other liabilities ($128,057 and $127,531 at fair value, respectively)	1,310,100		887,519
Intangible liabilities, net	94,196		111,484
Liabilities related to assets held for disposition	3,697,541		3,862,521
Due to affiliates	601		34,064
Dividends and distributions payable	18,516		83,301
Preferred stock redemptions payable	—		402,855
Total liabilities	12,910,692		10,899,662
Commitments and contingencies (Note 22)
Redeemable noncontrolling interests	305,278		6,107
Equity
Stockholders’ equity:
Preferred stock, $0.01 par value per share; $1,033,750 liquidation preference; 250,000 shares authorized; 41,350 shares issued and outstanding	999,490		999,490
Common stock, $0.01 par value per share
Class A, 949,000 shares authorized; 483,406 and 487,044 shares issued and outstanding, respectively	4,834		4,871
Class B, 1,000 shares authorized; 734 shares issued and outstanding	7		7
Additional paid-in capital	7,570,473		7,553,599
Accumulated deficit	(6,195,456)		(3,389,592)
Accumulated other comprehensive income	122,123		47,668
Total stockholders’ equity	2,501,471		5,216,043
Noncontrolling interests in investment entities	4,327,372		3,254,188
Noncontrolling interests in Operating Company	155,747		456,184
Total equity	6,984,590		8,926,415
Total liabilities, redeemable noncontrolling interests and equity	$	20,200,560	$	19,832,184

The accompanying notes are an integral part of the consolidated financial statements.

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COLONY CAPITAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)


	Year Ended December 31,
		2020		2019		2018
Revenues
Property operating income		$	936,160	$	737,364	$	766,923
Interest income		80,471		166,765		214,588
Fee income ($176,524, $220,584 and $143,218 from affiliates, respectively)		177,755		223,915		144,443
Other income ($23,855, $64,226 and $34,695 from affiliates, respectively)		42,208		78,779		45,978
Total revenues		1,236,594		1,206,823		1,171,932
Expenses
Property operating expense		423,716		333,354		345,495
Interest expense		310,454		306,809		334,560
Investment and servicing expense		62,529		60,646		52,087
Transaction costs		5,966		3,607		7,259

Depreciation and amortization		431,443		307,594		251,981
Provision for loan loss		—		35,880		43,034
Impairment loss		1,473,997		1,086,530		500,434
Compensation expense—cash and equity-based		246,938		209,504		207,370
Compensation expense—carried interest and incentive fee		(8,437)		16,564		7,485
Administrative expenses		110,210		89,906		98,364
Settlement loss		5,090		—		—
Total expenses		3,061,906		2,450,394		1,848,069
Other income (loss)
Gain on sale of real estate		25,986		62,003		154,980
Other gain (loss), net		(211,084)		(194,106)		53,166
Equity method earnings (losses)		(455,840)		(140,384)		(9,601)
Equity method earnings (losses)—carried interest		(8,026)		11,682		9,525
Loss from continuing operations before income taxes		(2,474,276)		(1,504,376)		(468,067)
Income tax benefit (expense)		10,039		(13,976)		50,104
Loss from continuing operations		(2,464,237)		(1,518,352)		(417,963)
Income (loss) from discontinued operations		(1,326,173)		1,369,437		(77,212)
Net loss		(3,790,410)		(148,915)		(495,175)
Net income (loss) attributable to noncontrolling interests:
Redeemable noncontrolling interests		616		2,559		(3,708)
Investment entities		(812,547)		990,360		67,994
Operating Company		(302,720)		(93,027)		(39,854)
Net loss attributable to Colony Capital, Inc.		(2,675,759)		(1,048,807)		(519,607)
Preferred stock redemption (Note 14)		—		(5,150)		(3,995)
Preferred stock dividends		75,023		108,550		117,097
Net loss attributable to common stockholders		$	(2,750,782)	$	(1,152,207)	$	(632,709)
Loss per share—basic
Loss from continuing operations per common share—basic		$	(3.60)	$	(3.16)	$	(1.12)
Net loss attributable to common stockholders per common share—basic		$	(5.81)	$	(2.41)	$	(1.28)
Loss per share—diluted
Loss from continuing operations per common share—diluted		$	(3.60)	$	(3.16)	$	(1.12)
Net loss attributable to common stockholders per common share—diluted		$	(5.81)	$	(2.41)	$	(1.28)
Weighted average number of shares
Basic		473,558		479,588		496,993
Diluted		473,558		479,588		496,993

The accompanying notes are an integral part of the consolidated financial statements.

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COLONY CAPITAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)


	Year Ended December 31,
		2020		2019		2018
Net loss		$	(3,790,410)	$	(148,915)	$	(495,175)
Changes in accumulated other comprehensive income (loss) related to:
Investments in unconsolidated ventures, net		9,292		6,366		(1,809)
Available-for-sale debt securities		(1,964)		12,052		(18,645)
Cash flow hedges		(30)		(767)		(487)

Foreign currency translation		160,008		(24,234)		(81,135)
Net investment hedges		21,001		27,541		33,747

Other comprehensive income (loss)		188,307		20,958		(68,329)
Comprehensive loss		(3,602,103)		(127,957)		(563,504)
Comprehensive income (loss) attributable to noncontrolling interests:
Redeemable noncontrolling interests		616		2,559		(3,708)
Investment entities		(706,374)		973,447		34,573
Operating Company		(294,577)		(89,793)		(41,719)
Comprehensive loss attributable to stockholders		$	(2,601,768)	$	(1,014,170)	$	(552,650)

The accompanying notes are an integral part of the consolidated financial statements.

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COLONY CAPITAL, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except per share data)


	Preferred Stock		Common Stock		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Stockholders’ Equity		Noncontrolling Interests in Investment Entities		Noncontrolling Interests in Operating Company		Total Equity


Balance at December 31, 2017	$	1,606,966	$	5,433	$	7,913,622	$	(1,165,412)	$	47,316	$	8,407,925	$	3,539,072	$	402,395	$	12,349,392
Cumulative effect of adoption of new accounting pronouncements (Note 2)	—		—		—		(1,018)		(202)		(1,220)		—		—		(1,220)
Net income (loss)	—		—		—		(519,607)		—		(519,607)		67,994		(39,854)		(491,467)
Other comprehensive loss	—		—		—		—		(33,043)		(33,043)		(33,421)		(1,865)		(68,329)
Redemption of preferred stock (Note 14)	(199,471)		—		(529)		—		—		(200,000)		—		—		(200,000)
Common stock repurchases	—		(614)		(350,096)		—		—		(350,710)		—		—		(350,710)
Redemption of OP Units for cash and class A common stock	—		20		29,014		—		—		29,034		—		(33,864)		(4,830)
Equity-based compensation	—		34		39,672		—		—		39,706		486		1,414		41,606
Shares canceled for tax withholdings on vested stock awards	—		(33)		(34,170)		—		—		(34,203)		—		—		(34,203)
Reclassification of contingent consideration out of liability at end of measurement period	—		—		12,539		—		—		12,539		—		—		12,539
Issuance of OP Units and common stock—contingent consideration	—		1		—		—		—		1		—		24,608		24,609
Deconsolidation of investment entities (Note 6)	—		—		—		—		—		—		(330,980)		—		(330,980)
Contributions from noncontrolling interests	—		—		—		—		—		—		1,059,891		—		1,059,891
Distributions to noncontrolling interests	—		—		—		—		—		—		(489,261)		(13,793)		(503,054)
Preferred stock dividends	—		—		—		(115,019)		—		(115,019)		—		—		(115,019)
Common stock dividends declared ($0.44 per share)	—		—		—		(217,246)		—		(217,246)		—		—		(217,246)
Reallocation of equity (Notes 2 and 15)	—		—		(12,033)		—		(72)		(12,105)		(34,053)		21,549		(24,609)
Balance at December 31, 2018	$	1,407,495	$	4,841	$	7,598,019	$	(2,018,302)	$	13,999	$	7,006,052	$	3,779,728	$	360,590	$	11,146,370

The accompanying notes are an integral part of the consolidated financial statements.

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COLONY CAPITAL, INC.

CONSOLIDATED STATEMENTS OF EQUITY (Continued)

(In thousands, except per share data)


	Preferred Stock		Common Stock		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity		Noncontrolling Interests in Investment Entities		Noncontrolling Interests in Operating Company		Total Equity
















Balance at December 31, 2018	$	1,407,495	$	4,841	$	7,598,019	$	(2,018,302)	$	13,999	$	7,006,052	$	3,779,728	$	360,590	$	11,146,370
Cumulative effect of adoption of new accounting pronouncement (Note 2)	—		—		—		(2,905)		—		(2,905)		(1,378)		(185)		(4,468)
Net income (loss)	—		—		—		(1,048,807)		—		(1,048,807)		990,360		(93,027)		(151,474)
Other comprehensive income (loss)	—		—		—		—		34,637		34,637		(16,913)		3,234		20,958
Fair value of noncontrolling interests assumed	—		—		—		—		—		—		789,367		—		789,367
Deconsolidation of investment entities	—		—		—		—		—		—		(6,235)		—		(6,235)
Redemption of preferred stock (Note 14)	(408,005)		—		5,150		—		—		(402,855)		—		—		(402,855)
Common stock repurchases	—		(7)		(3,160)		—		—		(3,167)		—		—		(3,167)
Redemption of OP Units for cash and class A common stock	—		2		2,102		—		—		2,104		—		(2,104)		—
Equity-based compensation	—		49		35,524		—		—		35,573		2,519		1,020		39,112
Shares canceled for tax withholdings on vested stock awards	—		(7)		(3,620)		—		—		(3,627)		—		—		(3,627)
Issuance of OP Units in connection with business combinations (Note 3)	—		—		—		—		—		—		—		114,865		114,865
Contributions from noncontrolling interests	—		—		—		—		—		—		536,235		—		536,235
Distributions to noncontrolling interests	—		—		—		—		—		—		(2,810,560)		(18,528)		(2,829,088)
Preferred stock dividends	—		—		—		(105,198)		—		(105,198)		—		—		(105,198)
Common stock dividends declared ($0.44 per share)	—		—		—		(214,380)		—		(214,380)		—		—		(214,380)
Reallocation of equity (Notes 2 and 15)	—		—		(80,416)		—		(968)		(81,384)		(8,935)		90,319		—
Balance at December 31, 2019	$	999,490	$	4,878	$	7,553,599	$	(3,389,592)	$	47,668	$	5,216,043	$	3,254,188	$	456,184	$	8,926,415

The accompanying notes are an integral part of the consolidated financial statements.

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COLONY CAPITAL, INC.

CONSOLIDATED STATEMENTS OF EQUITY (Continued)

(In thousands, except per share data)


	Preferred Stock		Common Stock		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity		Noncontrolling Interests in Investment Entities		Noncontrolling Interests in Operating Company		Total Equity














































Balance at December 31, 2019	$	999,490	$	4,878	$	7,553,599	$	(3,389,592)	$	47,668	$	5,216,043	$	3,254,188	$	456,184	$	8,926,415
Cumulative effect of adoption of new accounting pronouncement (Note 2)	—		—		—		(3,187)		—		(3,187)		(1,577)		(349)		(5,113)
Net income loss	—		—		—		(2,675,759)		—		(2,675,759)		(812,547)		(302,720)		(3,791,026)
Other comprehensive income	—		—		—		—		73,991		73,991		106,173		8,143		188,307
Common stock repurchases	—		(127)		(24,622)		—		—		(24,749)		—		—		(24,749)
Fair value of noncontrolling interest assumed in asset acquisition	—		—		—		—		—		—		366,136		—		366,136
Deconsolidation of investment entities (Note 8)	—		—		—		—		—		—		(80,921)		—		(80,921)
Redemption of OP Units for cash and class A common stock	—		22		7,735		—		—		7,757		—		(7,757)		—
Equity-based compensation	—		96		35,265		—		—		35,361		1,172		2,673		39,206
Shares canceled for tax withholdings on vested stock awards	—		(28)		(7,721)		—		—		(7,749)		—		—		(7,749)
Issuance of warrant (Note 15)	—		—		20,240		—		—		20,240		—		—		20,240
Costs related to contributions from noncontrolling interest	—		—		(6,707)		—		—		(6,707)		—		—		(6,707)
Contributions from noncontrolling interests	—		—		—		—		—		—		1,832,740		—		1,832,740
Distributions to noncontrolling interests	—		—		—		—		—		—		(339,414)		(5,857)		(345,271)
Preferred stock dividends	—		—		—		(74,064)		—		(74,064)		—		—		(74,064)
Common stock dividends declared ($0.11 per share)	—		—		—		(52,854)		—		(52,854)		—		—		(52,854)
Reallocation of equity (Note 2)	—		—		(7,316)		—		464		(6,852)		1,422		5,430		—
Balance at December 31, 2020	$	999,490	$	4,841	$	7,570,473	$	(6,195,456)	$	122,123	$	2,501,471	$	4,327,372	$	155,747	$	6,984,590

The accompanying notes are an integral part of the consolidated financial statements.

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COLONY CAPITAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	Year Ended December 31,
	2020		2019		2018
Cash Flows from Operating Activities
Net loss	$	(3,790,410)	$	(148,915)	$	(495,175)
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization of discount and net origination fees on loans receivable and debt securities	(6,154)		(19,602)		(23,194)
Paid-in-kind interest added to loan principal, net of interest received	(38,398)		(62,464)		(38,408)
Straight-line rent income	(20,453)		(20,741)		(29,330)
Amortization of above- and below-market lease values, net	(6,446)		(19,813)		(6,862)
Amortization of deferred financing costs and debt discount and premium, net	15,602		103,537		89,639
Equity method losses (gains)	463,866		87,444		(10,560)
Distributions of income from equity method investments	102,612		143,417		79,995
Provision for loan losses	—		35,880		43,034
Allowance for doubtful accounts	7,247		6,793		26,860
Impairment of real estate and related intangibles and right-of-use assets	1,987,130		358,443		588,223
Goodwill impairment	594,000		788,000		—
Depreciation and amortization	578,282		596,262		572,406
Equity-based compensation	34,959		39,573		41,876
Unrealized settlement loss	3,890		—		—
Gain on sales of real estate, net	(41,922)		(1,520,808)		(167,231)
Settlement of forward starting interest rate swap	—		(365,111)		—

Deferred income tax benefit	(25,086)		(9,602)		(69,430)
Other loss (gain), net	211,967		190,638		(51,706)
Decrease (increase) in other assets and due from affiliates	14,392		(23,937)		(40,123)
(Increase) decrease in accrued and other liabilities and due to affiliates	16,763		19,985		(470)
Other adjustments, net	(11,948)		(8,111)		(2,579)
Net cash provided by operating activities	89,893		170,868		506,965
Cash Flows from Investing Activities
Contributions to and acquisition of equity investments	(430,548)		(247,357)		(548,163)
Return of capital from equity method investments	294,932		224,169		433,144
Acquisition of loans receivable and debt securities	—		(771)		(104,247)
Net disbursements on originated loans	(219,990)		(168,960)		(317,952)
Repayments of loans receivable	227,831		229,970		143,360
Proceeds from sales of loans receivable and debt securities	46,272		66,249		225,607
Cash receipts in excess of accretion on purchased credit-impaired loans	—		31,128		159,229
Acquisition of and additions to real estate, related intangibles and leasing commissions	(2,559,343)		(1,918,317)		(1,349,467)
Proceeds from sales of real estate	431,198		6,108,153		864,347
Proceeds from paydown and maturity of debt securities	5,721		11,205		43,625
Cash and restricted cash contributed to CLNC (Note 6)	—		—		(141,153)

Proceeds from sale of equity investments	287,899		165,657		231,040
Proceeds from sale of equity interests in securitization trusts, net of cash and restricted cash deconsolidated (Note 13)	—		—		142,270
Investment deposits	(11,660)		(14,928)		(34,314)

Net receipts (payments) on settlement of derivatives	27,097		46,466		(15,954)
Acquisition of DBH, net of cash acquired, and payment of deferred purchase price (Note 3)	(32,500)		(184,167)		—
Acquisition of DataBank, net of cash acquired (Note 3)	—		(172,365)		—
Other investing activities, net	1,111		22,806		415
Net cash (used in) provided by investing activities	(1,931,980)		4,198,938		(268,213)

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COLONY CAPITAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In thousands)


	Year Ended December 31,
	2020		2019		2018
Cash Flows from Financing Activities


Dividends paid to preferred stockholders	$	(79,333)	$	(108,548)	$	(120,702)
Dividends paid to common stockholders	(106,510)		(214,149)		(310,519)
Repurchase of common stock	(24,749)		(10,734)		(343,143)

Proceeds from issuance of exchangeable senior notes	291,000		—		—
Repurchase of convertible senior notes	(370,998)		—		—
Borrowings from corporate credit facility	600,000		810,200		685,000
Repayment of borrowings from corporate credit facility	(600,000)		(810,200)		(735,000)
Borrowings from secured debt	2,016,833		4,664,450		1,791,021
Repayments of secured debt	(1,684,001)		(5,745,509)		(1,985,990)
Payment of deferred financing costs	(54,750)		(82,202)		(28,630)
Contributions from noncontrolling interests	1,906,250		578,706		1,019,888
Distributions to and redemptions of noncontrolling interests	(360,304)		(2,847,830)		(518,864)
Contribution from Wafra (Note 15)	253,575		—		—
Redemption of preferred stock	(402,855)		—		(200,000)
Shares canceled for tax withholdings on vested stock awards	(7,749)		(3,627)		(34,203)
Redemption of OP Units for cash	—		—		(4,830)


Other financing activities, net	(3,382)		(10,143)		(2,432)
Net cash provided by (used in) financing activities	1,373,027		(3,779,586)		(788,404)
Effect of exchange rates on cash, cash equivalents and restricted cash	7,370		1,748		(11,538)
Net (decrease) increase in cash, cash equivalents and restricted cash	(461,690)		591,968		(561,190)
Cash, cash equivalents and restricted cash, beginning of period	1,424,698		832,730		1,393,920
Cash, cash equivalents and restricted cash, end of period	$	963,008	$	1,424,698	$	832,730

Reconciliation of cash, cash equivalents and restricted cash to consolidated balance sheets


	Year Ended December 31,
	2020		2019		2018
Beginning of the period
Cash and cash equivalents	$	1,205,190	$	461,912	$	921,822
Restricted cash	91,063		135,650		216,754
Restricted cash included in assets held for disposition	128,445		235,168		255,344
Total cash, cash equivalents and restricted cash, beginning of period	$	1,424,698	$	832,730	$	1,393,920

End of the period
Cash and cash equivalents	$	703,544	$	1,205,190	$	461,912
Restricted cash	161,919		91,063		135,650
Restricted cash included in assets held for disposition	97,545		128,445		235,168
Total cash, cash equivalents and restricted cash, end of period	$	963,008	$	1,424,698	$	832,730

The accompanying notes are an integral part of the consolidated financial statements.

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COLONY CAPITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

1. Business

Colony Capital, Inc. (together with its consolidated subsidiaries, the "Company") is a leading global investment firm with a focus on identifying and capitalizing on key secular trends in digital real estate.

Following the acquisition in July 2019 of Digital Bridge Holdings, LLC (“DBH”), an investment manager dedicated to digital real estate and infrastructure, the Company is currently the only global real estate investment trust ("REIT") that owns, manages, and/or operates across all major infrastructure components of the digital ecosystem including data centers, cell towers, fiber networks and small cells. Marc C. Ganzi, who co-founded DBH, became the Chief Executive Officer ("CEO") and President of the Company effective July 1, 2020. In connection with Mr. Ganzi’s appointment as the Company’s CEO and President, the Board of Directors of the Company (the "Board") appointed Mr. Ganzi to the Board, also effective as of July 1, 2020. Thomas J. Barrack, Jr., who, prior to July 1, 2020, served as the Company’s CEO and President, continues to serve in his role as Executive Chairman of the Company and the Board. In addition, Jacky Wu was appointed as the Company’s Chief Financial Officer, effective July 1, 2020.

At December 31, 2020, the Company has $42 billion of assets under management, of which $29 billion is dedicated to digital real estate and infrastructure.

Organization

The Company conducts all of its activities and holds substantially all of its assets and liabilities through its operating subsidiary, Colony Capital Operating Company, LLC (the "Operating Company" or the "OP"). At December 31, 2020, the Company owned 90% of the OP, as its sole managing member. The remaining 10% is owned primarily by certain current and former employees of the Company as noncontrolling interests.

The Company elected to be taxed as a REIT under the Internal Revenue Code for U.S. federal income tax purposes.

Acceleration of Digital Transformation and COVID-19 Considerations

The volatility in equity and debt markets, and the economic contraction due to COVID-19 have adversely affected the valuation of certain of the Company's financial assets carried at fair value, such as loans receivable (Note 12), and also resulted in impairment of certain non-financial assets, in particular, non-digital real estate (Note 4) and equity method investments (Note 6).

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to align the hotel carrying values to the agreed upon selling price. The acceleration of the Company's digital transformation and the overall reduction in value of the Company's non-digital balance sheet also caused a shortfall in the fair value of the Company's other investment management reporting unit over its carrying value, resulting in significant impairment to the other investment management goodwill in the second quarter of 2020 (Note 7).

Exit of the Hospitality Business

The Company’s pending exit from the hospitality business represents a key milestone in its digital transformation. Accordingly, the sale of these hotel portfolios is a strategic shift that will have a significant effect on the Company’s operations and financial results, and has met the criteria as held for sale and discontinued operations. For all current and prior periods presented, the related assets and liabilities are presented as assets and liabilities held for disposition on the consolidated balance sheets (Note 8) and the related operating results are presented as loss from discontinued operations on the consolidated statements of operations (Note 16).

2. Summary of Significant Accounting Policies

The significant accounting policies of the Company are described below. The accounting policies of the Company's unconsolidated ventures are substantially similar to those of the Company.

Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated. The portions of equity, net income and other comprehensive income of consolidated subsidiaries that are not attributable to the parent are presented separately as amounts attributable to noncontrolling interests in the consolidated financial statements. A substantial portion of noncontrolling interests represents interests held by private investment funds or other investment vehicles managed by the Company and which invest alongside the Company and membership interests in OP primarily held by certain employees of the Company.

To the extent the Company consolidates a subsidiary that is subject to industry-specific guidance, the Company retains the industry-specific guidance applied by that subsidiary in its consolidated financial statements.

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Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates and assumptions.

Principles of Consolidation

The Company consolidates entities in which it has a controlling financial interest by first considering if an entity meets the definition of a variable interest entity ("VIE") for which the Company is deemed to be the primary beneficiary, or if the Company has the power to control an entity through a majority of voting interest or through other arrangements.

Variable Interest Entities—A VIE is an entity that either (i) lacks sufficient equity to finance its activities without additional subordinated financial support from other parties; (ii) whose equity holders lack the characteristics of a controlling financial interest; or (iii) is established with non-substantive voting rights. A VIE is consolidated by its primary beneficiary, which is defined as the party who has a controlling financial interest in the VIE through (a) power to direct the activities of the VIE that most significantly affect the VIE’s economic performance, and (b) obligation to absorb losses or right to receive benefits of the VIE that could be significant to the VIE. The Company also considers interests held by its related parties, including de facto agents. The Company assesses whether it is a member of a related party group that collectively meets the power and benefits criteria and, if so, whether the Company is most closely associated with the VIE. In performing the related party analysis, the Company considers both qualitative and quantitative factors, including, but not limited to: the amount and characteristics of its investment relative to the related party; the Company’s and the related party's ability to control or significantly influence key decisions of the VIE including consideration of involvement by de facto agents; the obligation or likelihood for the Company or the related party to fund operating losses of the VIE; and the similarity and significance of the VIE’s business activities to those of the Company and the related party. The determination of whether an entity is a VIE, and whether the Company is the primary beneficiary, may involve significant judgment, including the determination of which activities most significantly affect the entities’ performance, and estimates about the current and future fair values and performance of assets held by the VIE.

Voting Interest Entities—Unlike VIEs, voting interest entities have sufficient equity to finance their activities and equity investors exhibit the characteristics of a controlling financial interest through their voting rights. The Company consolidates such entities when it has the power to control these entities through ownership of a majority of the entities' voting interests or through other arrangements.

At each reporting period, the Company reassesses whether changes in facts and circumstances cause a change in the status of an entity as a VIE or voting interest entity, and/or a change in the Company's consolidation assessment. Changes in consolidation status are applied prospectively. An entity may be consolidated as a result of this reassessment, in which case, the assets, liabilities and noncontrolling interest in the entity are recorded at fair value upon initial consolidation. Any existing equity interest held by the Company in the entity prior to the Company obtaining control will be remeasured at fair value, which may result in a gain or loss recognized upon initial consolidation. However, if the consolidation represents an asset acquisition of a voting interest entity, the Company's existing interest in the acquired assets, if any, is not remeasured to fair value but continues to be carried at historical cost. The Company may also deconsolidate a subsidiary as a result of this reassessment, which may result in a gain or loss recognized upon deconsolidation depending on the carrying values of deconsolidated assets and liabilities compared to the fair value of any interests retained.

Noncontrolling Interests

Redeemable Noncontrolling Interests—This represents noncontrolling interests in the Company's digital investment management business and in consolidated open-end funds sponsored by the Company. The noncontrolling interests either have redemption rights that will be triggered upon the occurrence of certain events (Note 16) or have the ability to withdraw all or a portion of their interests from the consolidated open-end funds in cash with advance notice.

Redeemable noncontrolling interests is presented outside of permanent equity. Allocation of net income or loss to redeemable noncontrolling interests is based upon their ownership percentage during the period. The carrying amount of redeemable noncontrolling interests is adjusted to its redemption value at the end of each reporting period to an amount not less than its initial carrying value, except for amounts contingently redeemable which will be adjusted to redemption value only when redemption is probable. Such adjustments will be recognized in additional paid-in capital.

Noncontrolling Interests in Investment Entities—This represents predominantly interests in consolidated investment entities held by private investment funds managed by the Company or held by third party joint venture partners. Allocation of net income or loss is generally based upon relative ownership interests held by equity owners in each investment entity,

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or based upon contractual arrangements that may provide for disproportionate allocation of economic returns among equity interests, including using a hypothetical liquidation at book value basis, where applicable and substantive.

Noncontrolling Interests in Operating Company—This represents membership interests in OP held primarily by certain employees of the Company. Noncontrolling interests in OP are allocated a share of net income or loss in OP based on their weighted average ownership interest in OP during the period. Noncontrolling interests in OP have the right to require OP to redeem part or all of such member’s membership units in OP ("OP Units") for cash based on the market value of an equivalent number of shares of class A common stock at the time of redemption, or at the Company's election as managing member of OP, through issuance of shares of class A common stock (registered or unregistered) on a one-for-one basis. At the end of each reporting period, noncontrolling interests in OP is adjusted to reflect their ownership percentage in OP at the end of the period, through a reallocation between controlling and noncontrolling interests in OP, as applicable.

Foreign Currency

Assets and liabilities denominated in a foreign currency for which the functional currency is a foreign currency are translated using the exchange rate in effect at the balance sheet date and the corresponding results of operations for such entities are translated using the average exchange rate in effect during the period. The resulting foreign currency translation adjustments are recorded as a component of accumulated other comprehensive income or loss in stockholders’ equity. Upon sale, complete or substantially complete liquidation of a foreign subsidiary, or upon partial sale of a foreign equity method investment, the translation adjustment associated with the investment, or a proportionate share related to the portion of equity method investment sold, is reclassified from accumulated other comprehensive income or loss into earnings.

Assets and liabilities denominated in a foreign currency for which the functional currency is the U.S. dollar are remeasured using the exchange rate in effect at the balance sheet date and the corresponding results of operations for such entities are remeasured using the average exchange rate in effect during the period. The resulting foreign currency remeasurement adjustments are recorded in other gain (loss) on the statements of operations. Disclosures of non-U.S. dollar amounts to be recorded in the future are translated using exchange rates in effect at the date of the most recent balance sheet presented.

Fair Value Measurement

Fair value is based on an exit price, defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Where appropriate, the Company makes adjustments to estimated fair values to appropriately reflect counterparty credit risk as well as the Company's own credit-worthiness.

The estimated fair value of financial assets and financial liabilities are categorized into a three tier hierarchy, prioritized based on the level of transparency in inputs used in the valuation techniques, as follows:

Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in non-active markets, or valuation techniques utilizing inputs that are derived principally from or corroborated by observable data directly or indirectly for substantially the full term of the financial instrument.

Level 3—At least one assumption or input is unobservable and it is significant to the fair value measurement, requiring significant management judgment or estimate.

Where the inputs used to measure the fair value of a financial instrument falls into different levels of the fair value hierarchy, the financial instrument is categorized within the hierarchy based on the lowest level of input that is significant to its fair value measurement.

Fair Value Option

The fair value option provides an option to elect fair value as a measurement alternative for selected financial instruments. The fair value option may be elected only upon the occurrence of certain specified events, including when the Company enters into an eligible firm commitment, at initial recognition of the financial instrument, as well as upon a business combination or consolidation of a subsidiary. The election is irrevocable unless a new election event occurs.

The Company has elected to account for certain equity method investments at fair value and effective January 1, 2020, elected fair value option for all loans receivable upon adoption of Accounting Standards Codification ("ASC") 326, Financial Instruments—Credit Losses.

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Prior to deconsolidation in May 2018, the Company had elected the fair value option for financial assets and financial liabilities of certain consolidated securitization trusts, and adopted the measurement alternative to measure both the financial assets and financial liabilities of the securitization trusts using the fair value of either the financial assets or financial liabilities, whichever is more observable.

Business Combinations

Definition of a Business—The Company evaluates each purchase transaction to determine whether the acquired assets meet the definition of a business. If substantially all of the fair value of gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, then the set of transferred assets and activities is not a business. If not, for an acquisition to be considered a business, it would have to include an input and a substantive process that together significantly contribute to the ability to create outputs (i.e., there is a continuation of revenue before and after the transaction). A substantive process is not ancillary or minor, cannot be replaced without significant costs, effort or delay or is otherwise considered unique or scarce. To qualify as a business without outputs, the acquired assets would require an organized workforce with the necessary skills, knowledge and experience that performs a substantive process.

Asset Acquisitions—For acquisitions that are not deemed to be businesses, the assets acquired are recognized based on their cost to the Company as the acquirer and no gain or loss is recognized. The cost of assets acquired in a group is allocated to individual assets within the group based on their relative fair values and does not give rise to goodwill. Transaction costs related to acquisition of assets are included in the cost basis of the assets acquired.

Business Combinations—The Company accounts for acquisitions that qualify as business combinations by applying the acquisition method. Transaction costs related to acquisition of a business are expensed as incurred and excluded from the fair value of consideration transferred. The identifiable assets acquired, liabilities assumed and noncontrolling interests in an acquired entity are recognized and measured at their estimated fair values. The excess of the fair value of consideration transferred over the fair values of identifiable assets acquired, liabilities assumed and noncontrolling interests in an acquired entity, net of fair value of any previously held interest in the acquired entity, is recorded as goodwill. Such valuations require management to make significant estimates and assumptions.

Contingent Consideration—Contingent consideration is classified as a liability or equity, as applicable. Contingent consideration in connection with the acquisition of a business or a VIE is measured at fair value on acquisition date, and unless classified as equity, is remeasured at fair value each reporting period thereafter until the consideration is settled, with changes in fair value included in net income. Contingent consideration in connection with the acquisition of assets (and that is not a VIE) is generally recognized only when the contingency is resolved, as part of the basis of the acquired assets.

Discontinued Operations

If the disposition of a component, being an operating or reportable segment, business unit, subsidiary or asset group, represents a strategic shift that has or will have a major effect on the Company’s operations and financial results, the operating profits or losses of the component when classified as held for sale, and the gain or loss upon disposition of the component, are presented as discontinued operations in the statements of operations.

A business or asset group acquired in connection with a purchase business combination that meets the criteria to be accounted for as held for sale at the date of acquisition is reported as discontinued operations, regardless of whether it meets the strategic shift criteria.

The pending disposition of the hotel business, composed of the Hospitality segment and the THL Hotel Portfolio in the Other segment, and the disposition of the industrial business in December 2019, including its related management platform, represent strategic shifts that have major effects on the Company’s operations and financial results, and have met the criteria as held for sale and discontinued operations in September 2020 and June 2019, respectively. Accordingly, for all prior periods presented, the related assets and liabilities are presented as assets and liabilities held for disposition on the consolidated balance sheets (Note 8) and the related operating results are presented as income from discontinued operations on the consolidated statements of operations (Note 16).

Cash and Cash Equivalents

Short-term, highly liquid investments with original maturities of three months or less are considered to be cash equivalents. The Company's cash and cash equivalents are held with major financial institutions and may at times exceed federally insured limits.

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Restricted Cash

Restricted cash consists primarily of amounts related to operating real estate and loans receivable, investment sales proceeds held in escrow, and cash held by the Company’s foreign subsidiaries due to certain regulatory capital requirements.

Real Estate Assets

Real Estate Acquisitions

Real estate acquisitions are recorded at the fair values of the acquired components at the time of acquisition, allocated among land, building, site and building improvements, infrastructure, equipment, lease-related tangible and intangible assets and liabilities, such as tenant improvements, deferred leasing costs, in-place lease values, above- and below-market lease values, and tenant relationships. The estimated fair value of acquired land is derived from recent comparable sales of land and listings within the same local region based on available market data. The estimated fair value of acquired buildings and building improvements is derived from comparable sales, discounted cash flow analysis using market-based assumptions, or replacement cost for a similar property, as appropriate. The fair value of site and tenant improvements and infrastructure assets are estimated based upon current market replacement costs and other relevant market rate information.

Real Estate Held for Investment

Real estate held for investment are carried at cost less accumulated depreciation.

Costs Capitalized or Expensed—Expenditures for ordinary repairs and maintenance are expensed as incurred, while expenditures for significant renovations that improve or extend the useful life of the asset are capitalized and depreciated over their estimated useful lives.

Depreciation—Real estate held for investment, other than land, are depreciated on a straight-line basis over the estimated useful lives of the assets, as follows:


Real Estate Assets						Term
Land improvements						5 to 21 years
Building (fee interest)						5 to 51 years
Building leasehold interests						Lesser of remaining term of lease or remaining life of building
Building improvements						Lesser of useful life or remaining life of building
Tenant improvements						Lesser of useful life or remaining term of lease
Data center infrastructure						10 to 19 years
Furniture, fixtures and equipment						1 to 20 years

Impairment—The Company evaluates its real estate held for investment for impairment periodically or whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. The Company evaluates real estate for impairment generally on an individual property basis. If an impairment indicator exists, the Company evaluates the undiscounted future net cash flows that are expected to be generated by the property, including any estimated proceeds from the eventual disposition of the property. If multiple outcomes are under consideration, the Company may apply either a probability-weighted cash flows approach or the single-most-likely estimate of cash flows approach, whichever is more appropriate under the circumstances. Based upon the analysis, if the carrying value of a property exceeds its undiscounted future net cash flows, an impairment loss is recognized for the excess of the carrying value of the property over the estimated fair value of the property. In evaluating and/or measuring impairment, the Company considers, among other things, current and estimated future cash flows associated with each property for the duration of the estimated hold period of each property, market information for each sub-market, including, where applicable, competition levels, foreclosure levels, leasing trends, occupancy trends, lease or room rates, and the market prices of similar properties recently sold or currently being offered for sale, expected capitalization rates at exit, and other quantitative and qualitative factors. Another key consideration in this assessment is the Company's assumptions about the highest and best use of its real estate investments and its intent and ability to hold them for a reasonable period that would allow for the recovery of their carrying values. If such assumptions change and the Company shortens its expected hold period, this may result in the recognition of impairment losses.

Real Estate Held for Sale

Real estate is classified as held for sale in the period when (i) management approves a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, subject only to usual and customary terms, (iii) a program is initiated to locate a buyer and actively market the asset for sale at a reasonable price, and (iv) completion of the sale is probable within one year.

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Real estate held for sale is stated at the lower of its carrying amount or estimated fair value less disposal cost, with any write-down to fair value less disposal cost recorded as an impairment loss. For any increase in fair value less disposal cost subsequent to classification as held for sale, the impairment loss may be reversed, but only up to the amount of cumulative loss previously recognized. Depreciation is not recorded on assets classified as held for sale. At the time a sale is consummated, the excess, if any, of sale price less selling costs over carrying value of the real estate is recognized as a gain.

If circumstances arise that were previously considered unlikely and, as a result, the Company decides not to sell the real estate asset previously classified as held for sale, the real estate asset is reclassified as held for investment. Upon reclassification, the real estate asset is measured at the lower of (i) its carrying amount prior to classification as held for sale, adjusted for depreciation expense that would have been recognized had the real estate been continuously classified as held for investment, or (ii) its estimated fair value at the time the Company decides not to sell.

Foreclosed Properties

The Company receives foreclosed properties in full or partial settlement of loans receivable by taking legal title or physical possession of the properties. Foreclosed properties are generally recognized at the time the real estate is received at foreclosure sale or upon execution of a deed in lieu of foreclosure. Foreclosed properties are initially measured at fair value. If the fair value of the property is lower than the carrying value of the loan, the difference is recognized as provision for loan loss and the cumulative loss allowance on the loan is charged off. The Company periodically evaluates foreclosed properties for subsequent decrease in fair value which is recorded as additional impairment loss. Fair value of foreclosed properties is generally based on third party appraisals, broker price opinions, comparable sales or a combination thereof.

Loans Receivable

Loans that the Company has the intent and ability to hold for the foreseeable future are classified as held for investment. Loans that the Company intends to sell or liquidate in the foreseeable future are classified as held for sale.

Interest income is recognized based upon contractual interest rate and unpaid principal balance of the loans. Loans that are past due 90 days or more as to principal or interest, or where reasonable doubt exists as to timely collection, are generally considered nonperforming, with reversal of interest income and suspension of interest income recognition. Recognition of interest income may be restored when all principal and interest are current and full repayment of the remaining contractual principal and interest are reasonably assured.

Fair Value Option

Effective January 1, 2020, the Company elected the fair value option for all loans receivable upon adoption of ASC") 326, Financial Instruments—Credit Losses.

Loan fair values are generally determined by comparing the current yield to the estimated yield of newly originated loans with similar credit risk or the market yield at which a third party might expect to purchase such investment; or based on discounted cash flow projections of principal and interest expected to be collected, which includes, but is not limited to, consideration of the financial standing of the borrower or sponsor as well as operating results and/or value of the underlying collateral.

For loans that are nonperforming where recognition of interest income is suspended, any interest subsequently collected is recognized on a cash basis by crediting income when received.

Origination and other fees charged to the borrower are recognized immediately as interest income when earned. Costs to originate or purchase loans are expensed as incurred.

Amortized Cost

Prior to 2020, all loans receivable were accounted for under the amortized cost framework which depends on the Company's strategy whether to hold or sell the loan, whether the loan was credit-impaired at the time of acquisition, or if the lending arrangement is an acquisition, development and construction loan, as follows.

Loans Held for Investment (other than Purchased Credit-Impaired Loans)

Originated loans are recorded at amortized cost, or outstanding unpaid principal balance less net deferred loan fees. Net deferred loan fees include unamortized origination and other fees charged to the borrower less direct incremental loan origination costs incurred by the Company. Purchased loans are recorded at amortized cost, or unpaid principal balance plus purchase premium or less unamortized discount. Costs to purchase loans are expensed as incurred.

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Interest Income—For loans placed on nonaccrual status where recognition of interest income is suspended, any interest subsequently collected is recognized on a cash basis by crediting income when received; or if ultimate collectability of loan principal is uncertain, interest collected is recognized using a cost recovery method by applying interest collected as a reduction to loan carrying value.

Net deferred loan fees on originated loans are deferred and amortized as adjustments to interest income over the expected life of the loans using the effective yield method. Premium or discount on purchased loans are amortized as adjustments to interest income over the expected life of the loans using the effective yield method. For revolving loans, net deferred loan fees, premium or discount are amortized to interest income using the straight-line method. When a loan is prepaid, prepayment fees and any excess of proceeds over the carrying amount of the loan are recognized as additional interest income.

Impairment and Allowance for Loan Losses—On a periodic basis, the Company analyzes the extent and effect of any credit migration from underwriting and the initial investment review associated with the performance of a loan and/or value of its underlying collateral, financial and operating capability of the borrower or sponsor, as well as amount and status of any senior loan, where applicable. Specifically, operating results of collateral properties and any cash reserves are analyzed and used to assess whether cash from operations are sufficient to cover debt service requirements currently and into the future, ability of the borrower to refinance the loan, liquidation value of collateral properties, financial wherewithal of any loan guarantors as well as the borrower’s competency in managing and operating the collateral properties. Such analysis is performed at least quarterly, or more often as needed when impairment indicators are present. The Company does not utilize a statistical credit rating system to monitor and assess the credit risk and investment quality of its acquired or originated loans. Given the diversity of the Company's portfolio, management believes there is no consistent method of assigning a numerical rating to a particular loan that captures all of the various credit metrics and their relative importance. Therefore, the Company evaluates impairment and allowance for loan losses on an individual loan basis.

Loans are considered to be impaired when it is probable that the Company will not be able to collect all amounts due in accordance with contractual terms of the loans, including consideration of underlying collateral value. Allowance for loan losses represents the estimated probable credit losses inherent in loans held for investment at balance sheet date. Changes in allowance for loan losses are recorded in the provision for loan losses on the statement of operations. Allowance for loan losses generally excludes interest receivable as accrued interest receivable is reversed when a loan is placed on nonaccrual status. Allowance for loan losses is generally measured as the difference between the carrying value of the loan and either the present value of cash flows expected to be collected, discounted at the original effective interest rate of the loan or an observable market price for the loan. Subsequent changes in impairment are recorded as adjustments to the provision for loan losses. Loans are charged off against allowance for loan losses when all or a portion of the principal amount is determined to be uncollectable. A loan is considered to be collateral-dependent when repayment of the loan is expected to be provided solely by the underlying collateral. Impaired collateral dependent loans are written down to the fair value of the collateral less disposal cost through a provision and a charge-off against allowance for loan losses.

Troubled Debt Restructuring ("TDR")—A loan with contractual terms modified in a manner that grants concession to the borrower who is experiencing financial difficulty is classified as a TDR. Concessions could include term extensions, payment deferrals, interest rate reductions, principal forgiveness, forbearance, or other actions designed to maximize the Company's collection on the loan. As a TDR is generally considered to be an impaired loan, it is measured for impairment based on the Company's allowance for loan losses methodology.

Loans Held for Sale

Loans held for sale are carried at the lower of amortized cost or fair value less disposal cost, with valuation changes recognized as impairment loss. Loans held for sale are not subject to allowance for loan losses. Net deferred loan origination fees and loan purchase premiums or discounts are deferred and capitalized as part of the carrying value of the held for sale loan until the loan is sold, therefore included in the periodic valuation adjustments based on lower of cost or fair value less disposal cost.

Purchased Credit-Impaired ("PCI") Loans

PCI loans are acquired loans with evidence of credit quality deterioration for which it is probable at acquisition that the Company will collect less than the contractually required payments. PCI loans are recorded at the initial investment in the loans and accreted to the estimated cash flows expected to be collected as measured at acquisition date. The excess of cash flows expected to be collected, measured as of acquisition date, over the estimated fair value represents the accretable yield and is recognized in interest income over the remaining life of the loan using the effective interest method.

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The difference between contractually required payments as of the acquisition date and the cash flows expected to be collected ("nonaccretable difference") is not recognized as an adjustment of yield, loss accrual or valuation allowance.

The Company evaluates estimated future cash flows expected to be collected on a quarterly basis, starting with the first full quarter after acquisition, or earlier if conditions indicating impairment are present. If the cash flows expected to be collected cannot be reasonably estimated, either at acquisition or in subsequent evaluation, the Company may consider placing such PCI loans on nonaccrual, with interest income recognized using the cost recovery method or on a cash basis. Subsequent decreases in cash flows expected to be collected are evaluated to determine whether a provision for loan loss should be established. If decreases in expected cash flows result in a decrease in the estimated fair value of the loan below its amortized cost, the Company records a provision for loan losses calculated as the difference between the loan’s amortized cost and the revised cash flows, discounted at the loan’s effective yield. Subsequent increases in cash flows expected to be collected are first applied to reverse any previously recorded allowance for loan losses, with any remaining increases recognized prospectively through an adjustment to yield over its remaining life.

Factors that most significantly affect estimates of cash flows expected to be collected, and accordingly the accretable yield, include: (i) estimate of the remaining life of acquired loans which may change the amount of future interest income; (ii) changes to prepayment assumptions; (iii) changes to collateral value assumptions for loans expected to foreclose; and (iv) changes in interest rates on variable rate loans.

PCI loans may be aggregated into pools based upon common risk characteristics, such as loan performance, collateral type and/or geographic location of the collateral. A pool is accounted for as a single asset with a single composite yield and an aggregate expectation of estimated future cash flows. A PCI loan modified within a pool remains in the pool, with the effect of the modification incorporated into the expected future cash flows. A loan resolution within a loan pool, which may involve the sale of the loan or foreclosure on the underlying collateral, results in the removal of an allocated carrying amount, including an allocable portion of any existing allowance.

Acquisition, Development and Construction ("ADC") Arrangements

The Company provides loans to third party developers for the acquisition, development and construction of real estate. Under an ADC arrangement, the Company participates in the expected residual profits of the project through the sale, refinancing or other use of the property. The Company evaluates the characteristics of each ADC arrangement, including its risks and rewards, to determine whether they are more similar to those associated with a loan or an investment in real estate. ADC arrangements with characteristics implying loan classification are presented as loans receivable and result in the recognition of interest income. ADC arrangements with characteristics implying real estate joint ventures are presented as investments in unconsolidated joint ventures and are accounted for using the equity method. The classification of each ADC arrangement as either loan receivable or real estate joint venture involves significant judgment and relies on various factors, including market conditions, amount and timing of expected residual profits, credit enhancements in the form of guaranties, estimated fair value of the collateral, significance of borrower equity in the project, among others. The classification of ADC arrangements is performed at inception, and periodically reassessed when significant changes occur in the circumstances or conditions described above.

Equity Investments

A noncontrolling, unconsolidated ownership interest in an entity may be accounted for using one of: (i) equity method where applicable; (ii) fair value option if elected; (iii) fair value through earnings if fair value is readily determinable, including election of net asset value ("NAV") practical expedient where applicable; or (iv) for equity investments without readily determinable fair values, the measurement alternative to measure at cost adjusted for any impairment and observable price changes, as applicable.

Marketable equity securities are recorded as of trade date. Dividend income is recognized on the ex-dividend date and is included in other income.

Fair value changes of equity method investments under the fair value option are recorded in earnings from investments in unconsolidated ventures. Fair value changes of other equity investments, including adjustments for observable price changes under the measurement alternative, are recorded in other gain (loss).

On January 1, 2018, the Company recorded a $0.6 million decrease to accumulated deficit to reflect the measurement of equity investments at fair value through earnings upon adoption of Accounting Standards Update ("ASU") 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities.

Equity Method Investments

The Company accounts for investments under the equity method of accounting if it has the ability to exercise significant influence over the operating and financial policies of an entity, but does not have a controlling financial interest.

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The equity method investment is initially recorded at cost and adjusted each period for capital contributions, distributions and the Company's share of the entity’s net income or loss as well as other comprehensive income or loss. The Company's share of net income or loss may differ from the stated ownership percentage interest in an entity if the governing documents prescribe a substantive non-proportionate earnings allocation formula or a preferred return to certain investors. For certain equity method investments, the Company records its proportionate share of income on a one to three month lag. Distributions of operating profits from equity method investments are reported as operating activities, while distributions in excess of operating profits are reported as investing activities in the statement of cash flows under the cumulative earnings approach.

Carried Interest—The Company's equity method investments include its interests as general partner or equivalent in investment vehicles that it sponsors or co-sponsors. The Company recognizes earnings based on its proportionate share of results from these investment vehicles and a disproportionate allocation of returns based on the extent to which cumulative performance exceeds minimum return hurdles pursuant to terms of their respective governing agreements (“carried interests”). To the extent the investment vehicles qualify for investment company accounting, their underlying results and consequently, the calculation of carried interests, reflect changes in fair value of their investments each period. The amount of carried interest recognized based on the cumulative performance of each investment vehicle if it were liquidated as of the reporting date may be subject to reversal until such time the carried interest, if any, is realized. Realization of carried interest generally occurs upon disposition of all underlying investments of an investment vehicle, or in part with each disposition, pursuant to the governing documents of the investment vehicles.

Impairment

Evaluation of impairment applies to equity method investments and equity investments under the measurement alternative. If indicators of impairment exist, the Company will first estimate the fair value of its investment. In assessing fair value, the Company generally considers, among others, the estimated enterprise value of the investee or fair value of the investee's underlying net assets, including net cash flows to be generated by the investee as applicable, and for equity method investees with publicly traded equity, the traded price of the equity securities in an active market.

For investments under the measurement alternative, if carrying value of the investment exceeds its fair value, an impairment is deemed to have occurred.

For equity method investments, further consideration is made if a decrease in value of the investment is other-than-temporary to determine if impairment loss should be recognized. Assessment of other-than-temporary impairment ("OTTI") involves management judgment, including, but not limited to, consideration of the investee’s financial condition, operating results, business prospects and creditworthiness, the Company's ability and intent to hold the investment until recovery of its carrying value, or a significant and prolonged decline in traded price of the investee’s equity security. If management is unable to reasonably assert that an impairment is temporary or believes that the Company may not fully recover the carrying value of its investment, then the impairment is considered to be other-than-temporary.

Investments that are other-than-temporarily impaired are written down to their estimated fair value. Impairment loss is recorded in equity method earnings for equity method investments and in other gain (loss) for investments under the measurement alternative.

Debt Securities

Debt securities are recorded as of the trade date. Debt securities designated as available-for-sale (“AFS”) are carried at fair value with unrealized gains or losses included as a component of other comprehensive income. Upon disposition of AFS debt securities, the cumulative gains or losses in other comprehensive income (loss) that are realized are recognized in other gain (loss), net, on the statement of operations based on specific identification.

Interest Income—Interest income from debt securities, including stated coupon interest payments and amortization of purchase premiums or discounts, is recognized using the effective interest method over the expected lives of the debt securities.

For beneficial interests in debt securities that are not of high credit quality (generally credit rating below AA) or that can be contractually settled such that the Company would not recover substantially all of its recorded investment, interest income is recognized as the accretable yield over the life of the securities using the effective yield method. The accretable yield is the excess of current expected cash flows to be collected over the net investment in the security, including the yield accreted to date. The Company evaluates estimated future cash flows expected to be collected on a quarterly basis, starting with the first full quarter after acquisition, or earlier if conditions indicating impairment are present. If the cash flows expected to be collected cannot be reasonably estimated, either at acquisition or in subsequent evaluation, the Company may consider placing the securities on nonaccrual, with interest income recognized using the cost recovery method.

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Impairment—The Company performs an assessment, at least quarterly, to determine whether its AFS debt securities are considered to be impaired, that is if their fair value is less than their amortized cost basis.

If the Company intends to sell the impaired debt security or is more likely than not will be required to sell the debt security before recovery of its amortized cost, the entire impairment amount is recognized in earnings within other gain (loss) as a write-off of the amortized cost basis of the debt security.

If the Company does not intend to sell or is not more likely than not required to sell the debt security before recovery of its amortized cost:

•Effective January 1, 2020, the credit component of the loss is recognized in earnings within other gain (loss) as an allowance for credit loss, which may be subject to reversal for subsequent recoveries in fair value. The non-credit loss component is recognized in other comprehensive income or loss ("OCI"). The allowance is charged off against the amortized cost basis of the security if in a subsequent period, the Company intends to or more likely than not will be required to sell the security, or if the Company deems the security to be uncollectable.

•Prior to 2020, the Company evaluated if the decline in fair value was other-than-temporary, in which case, the credit loss component was recognized in earnings within other gain (loss) as a write-off of the amortized cost basis of the debt security that was not subject to subsequent reversal. The difference between the new amortized cost basis and the cash flows expected to be collected was accreted as interest income. The non-credit loss component was recognized in OCI. If the impairment was not other-than-temporary, the entire unrealized loss was recognized in OCI.

In assessing impairment and estimating future expected cash flows, factors considered include, but are not limited to, credit rating of the security, financial condition of the issuer, defaults for similar securities, performance and value of assets underlying an asset-backed security.

Identifiable Intangibles

In a business combination or asset acquisition, the Company may recognize identifiable intangibles that meet either or both the contractual legal criterion or the separability criterion. An indefinite-lived intangible is not subject to amortization until such time that its useful life is determined to no longer be indefinite, at which point, it will be assessed for impairment and its adjusted carrying amount amortized over its remaining useful life. Finite-lived intangibles are amortized over their useful life in a manner that reflects the pattern in which the intangible is being consumed if readily determinable, such as based upon expected cash flows; otherwise they are amortized on a straight-line basis. The useful life of all identified intangibles will be periodically reassessed and if useful life changes, the carrying amount of the intangible will be amortized prospectively over the revised useful life.

The Company's identifiable intangible assets are generally valued under the income approach, using an estimate of future net cash flows, discounted based upon risk-adjusted returns for similar underlying assets.

Lease-Related Intangibles—Identifiable intangibles recognized in acquisitions of operating real estate include in-place leases, deferred leasing costs, above- or below-market leases, and tenant relationships.

In-place leases generate value over and above the tangible real estate because a property that is occupied with leased space is typically worth more than a vacant building without a lease contract in place. Acquired in-place leases are valued as the forgone rental income had the property been acquired in an as if vacant state, using market data on comparable and recently signed leases. Deferred leasing costs represent leasing commissions and legal fees that would otherwise have been incurred if a lease was not in-place. Acquired in-place leases and deferred leasing costs are amortized on a straight-line basis to depreciation and amortization expense over the remaining term of the applicable leases. If an in-place lease is terminated, the unamortized portion is charged to depreciation and amortization expense.

The value of the above- or below-market component of acquired leases represents the difference between contractual rents of acquired leases and market rents at the time of the acquisition for the remaining lease term. Above- or below-market operating lease values are amortized on a straight-line basis as a decrease or increase to rental income, respectively, over the applicable lease terms. This includes fixed rate renewal options in acquired leases that are assumed to be renewed if below market, which are amortized to increase rental income over the renewal period.

Tenant relationships represent the estimated net cash flows attributable to the likelihood of lease renewal by an existing tenant relative to the cost of obtaining a new lease, taking into consideration the time it would take to execute a new lease or backfill a vacant space. Tenant relationships are amortized on a straight-line basis to depreciation and amortization expense over its estimated useful life.

Investment Management Intangibles—Identifiable intangibles recognized in acquisition of an investment management business generally include management contracts, which represent contractual rights to future fee income from in-place management contracts that is amortized based upon expected cash flows over the remaining term of the

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contracts; and investor relationships, which represent potential fee income generated from future reinvestment by existing investors that is amortized on a straight-line basis over its estimated useful life.

Other Intangible Assets—In addition to leasing activities, data center operators provide various data center services to their customers, largely in the colocation business, which give rise to customer service contract and customer relationship intangible assets in an acquisition of operating data centers. Customer service contracts are valued based upon an estimate of net cash flows from providing data center services that would have been forgone if these service contracts were not in place, taking into consideration the time it would take to execute a new contract. Customer service contracts are amortized on a straight-line basis over the remaining term of the respective contracts, and if the service contract is terminated, the remaining unamortized balance is charged off. Customer relationships represent incremental net cash flows to the business that is attributable to these in-place relationships, and is amortized on a straight-line basis over its estimated useful life.

Trade names are recognized as a separate identifiable intangible asset to the extent the Company intends to continue using the trade name post-acquisition. Trade names are valued as the savings from royalty fees that would have otherwise been incurred. Trade names are amortized on a straight-line basis over the estimated useful life, or not amortized if they are determined to have an indefinite useful life.

Impairment

Identifiable intangible assets are reviewed periodically to determine if circumstances exist which may indicate a potential impairment. If such circumstances are considered to exist, the Company evaluates if carrying value of the intangible asset is recoverable based upon an undiscounted cash flow analysis. Impairment loss is recognized for the excess, if any, of carrying value over estimated fair value of the intangible asset. An impairment establishes a new basis for the intangible asset and any impairment loss recognized is not subject to subsequent reversal.

Impairment analysis on lease intangible assets is performed in connection with the impairment assessment of the related real estate. In evaluating investment management intangibles for impairment, such as management contracts and investor relationships, the Company considers various factors that may affect future fee income, including but not limited to, changes in fee basis, amendments to contractual fee terms, and projected capital raising for future investment vehicles. Indefinite life trade names are impaired if the Company determines that it no longer intends to use the trade name.

Goodwill

Goodwill is an unidentifiable intangible asset and is recognized as a residual, generally measured as the excess of consideration transferred in a business combination over the identifiable assets acquired, liabilities assumed and noncontrolling interests in the acquiree. Goodwill is assigned to reporting units that are expected to benefit from the synergies of the business combination.

Goodwill is tested for impairment at the reporting units to which it is assigned at least on an annual basis in the fourth quarter of each year, or more frequently if events or changes in circumstances occur that would more likely than not reduce the fair value of a reporting unit below its carrying value, including goodwill. The assessment of goodwill for impairment may initially be performed based on qualitative factors to determine if it is more likely than not that the fair value of the reporting unit to which the goodwill is assigned is less than its carrying value, including goodwill. If so, a quantitative assessment is performed to identify both the existence of impairment and the amount of impairment loss. The Company may bypass the qualitative assessment and proceed directly to performing a quantitative assessment to compare the fair value of a reporting unit with its carrying value, including goodwill. Impairment is measured as the excess of carrying value over fair value of the reporting unit, with the loss recognized limited to the amount of goodwill assigned to that reporting unit.

An impairment establishes a new basis for goodwill and any impairment loss recognized is not subject to subsequent reversal. Goodwill impairment tests require judgment, including identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit.

Accounts Receivable and Related Allowance

Property Operating Income Receivables (excluding lease income receivables)—The Company periodically evaluates aged receivables and considers the collectability of unbilled receivables. The Company establishes an allowance when, based upon current information and events, it is probable that the Company will be unable to collect all amounts due under existing contractual terms, and the amount can be reasonably estimated.

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Cost Reimbursements and Recoverable Expenses—The Company is entitled to reimbursements and/or recovers certain costs paid on behalf of investment vehicles managed by the Company, which include: (i) organization and offering costs associated with the formation and capital raising of the investment vehicles subject to certain limitations; (ii) direct and indirect operating costs associated with managing the operations of certain investment vehicles; and (iii) costs incurred in performing investment due diligence. Indirect operating costs are recorded as expenses of the Company when incurred and amounts allocated and reimbursable are recorded as other income in the consolidated statements of operations. The Company facilitates the payments of organization and offering costs, due diligence costs to the extent the related investments are consummated and direct operating costs, all of which are recorded as due from affiliates on the consolidated balance sheets, until such amounts are repaid. Due diligence costs related to unconsummated investments that are borne by the Company are expensed as investment and servicing expense in the consolidated statement of operations. The Company assesses the collectability of such receivables and establishes an allowance for any balances considered not collectable.

Fixed Assets

Fixed assets of the Company are presented within other assets and carried at cost less accumulated depreciation and amortization. Ordinary repairs and maintenance are expensed as incurred. Major replacements and betterments which improve or extend the life of assets are capitalized and depreciated over their useful life. Depreciation and amortization is recognized on a straight-line basis over the estimated useful life of the assets, which range between 3 to 5 years for furniture, fixtures, equipment and capitalized software, and over the shorter of the lease term or useful life for leasehold improvements.

Transfers of Financial Assets

Sale accounting for transfers of financial assets is limited to the transfer of an entire financial asset, a group of financial assets in its entirety, or a component of a financial asset which meets the definition of a participating interest with characteristics that are similar to the original financial asset.

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. If the Company has any continuing involvement, rights or obligations with the transferred financial asset (outside of standard representations and warranties), sale accounting requires that the transfer meets the following conditions: (1) the transferred asset has been legally isolated; (2) the transferee has the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred asset; and (3) the Company does not maintain effective control over the transferred asset through an agreement that provides for (a) both an entitlement and an obligation by the Company to repurchase or redeem the asset before its maturity, (b) the unilateral ability by the Company to reclaim the asset and a more than trivial benefit attributable to that ability, or (c) the transferee requiring the Company to repurchase the asset at a price so favorable to the transferee that it is probable the repurchase will occur.

If the criteria for sale accounting are met, the transferred financial asset is removed from the balance sheet and a net gain or loss is recognized upon sale, taking into account any retained interests. Transfers of financial assets that do not meet the criteria for sale are accounted for as financing transactions.

Derivative Instruments and Hedging Activities

The Company uses derivative instruments to manage its foreign currency risk and interest rate risk. The Company does not use derivative instruments for speculative or trading purposes. All derivative instruments are recorded at fair value and included in other assets or other liabilities on a gross basis on the balance sheet. The accounting for changes in fair value of derivatives depends upon whether the Company has elected to designate the derivative in a hedging relationship and the derivative qualifies for hedge accounting. The Company has economic hedges that have not been designated for hedge accounting.

Changes in fair value of derivatives not designated as accounting hedges are recorded in the statement of operations in other gain (loss).

For designated accounting hedges, the relationships between hedging instruments and hedged items, risk management objectives and strategies for undertaking the accounting hedges as well as the methods to assess the effectiveness of the derivative prospectively and retrospectively, are formally documented at inception. Hedge effectiveness relates to the amount by which the gain or loss on the designated derivative instrument exactly offsets the change in the hedged item attributable to the hedged risk. If it is determined that a derivative is not expected to be or has ceased to be highly effective at hedging the designated exposure, hedge accounting is discontinued.

Cash Flow Hedges—The Company uses interest rate caps and swaps to hedge its exposure to interest rate fluctuations in forecasted interest payments on floating rate debt and may designate as cash flow hedges. Changes in fair

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value of the derivative is recorded in accumulated other comprehensive income (loss) or AOCI and reclassified into earnings when the hedged item affects earnings. If the derivative in a cash flow hedge is terminated or the hedge designation is removed, related amounts in AOCI are reclassified into earnings when the hedged item affects earnings.

Net Investment Hedges—The Company uses foreign currency hedges to protect the value of its net investments in foreign subsidiaries or equity method investees whose functional currencies are not U.S. dollars. Changes in fair value of derivatives used as hedges of net investment in foreign operations are recorded in the cumulative translation adjustment account within AOCI.

At the end of each quarter, the Company reassesses the effectiveness of its net investment hedges and as appropriate, dedesignates the portion of the derivative notional that is in excess of the beginning balance of its net investments as undesignated hedges.

Release of amounts in AOCI related to net investment hedges occurs upon losing a controlling financial interest in an investment or obtaining control over an equity method investment. Upon sale, complete or substantially complete liquidation of an investment in a foreign subsidiary, or partial sale of an equity method investment, the gain or loss on the related net investment hedge is reclassified from AOCI to earnings.

Leases

As lessee, the Company determines if an arrangement contains a lease and determines the classification of a leasing arrangement at its inception. A lease is classified as a finance lease, which represents a financed purchase of the leased asset, if the lease meets any of the following criteria: (a) asset ownership is transferred to lessee by end of lease term; (b) option to purchase asset is reasonably certain to be exercised by lessee; (c) the lease term is for a major part of the remaining economic life of the asset; (d) the present value of lease payments equals or exceeds substantially the fair value of the asset; or (e) the asset is of such a specialized nature that it is expected to have no alternative use at end of lease term. A lease is classified as an operating lease when none of the criteria are met.

The Company's leasing arrangements are composed primarily of finance and operating leases for data centers, operating ground leases for other investment properties, and operating leases for its corporate offices.

Short-term leases are not recorded on the balance sheet, with lease payments expensed on a straight-line basis over the lease term. Short-term leases are defined as leases which at commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise.

For leases with terms greater than 12 months, a lessee's rights to use the leased asset and obligation to make future lease payments are recognized on balance sheet at lease commencement date as a right-of-use ("ROU") lease asset and a lease liability, respectively. The lease liability is measured based upon the present value of future lease payments over the lease term, discounted at the incremental borrowing rate. Variable lease payments are excluded and are recognized as lease expense as incurred. Lease renewal or termination options are taken into account only if it is reasonably certain that the option would be exercised. As an implicit rate is not readily determinable in most leases, an estimated incremental borrowing rate is applied, which is the interest rate that the Company or its subsidiary, where applicable, would have to pay to borrow an amount equal to the lease payments, on a collateralized basis over the lease term. In estimating incremental borrowing rates, consideration is given to recent debt financing transactions by the Company or its subsidiaries as well as publicly available data for debt instruments with similar characteristics, adjusted for the lease term. The ROU lease asset is measured based upon the corresponding lease liability, reduced by any lease incentives and adjusted to include capitalized initial direct leasing costs.

The Company's ROU lease asset is presented within other assets and is amortized on a straight-line basis over the shorter of its useful life or remaining lease term. The Company's lease liability is presented within accrued and other liabilities. The lease liability is (a) reduced by lease payments made during the period under both finance and operating leases; and (b) additionally, for finance leases, accreted to reflect accrued interest for effectively financing the leased asset. For finance leases, periodic lease payments are allocated between (i) interest expense, calculated based upon the incremental borrowing rate determined at commencement, to produce a constant periodic interest rate on the remaining balance of the lease liability, and (ii) reduction of lease liability. The combination of periodic interest expense and amortization expense on the ROU lease asset effectively reflects installment purchases on the financed leased asset, and results in a front-loaded expense recognition. Higher interest expense is recorded in the early periods as a constant interest rate is applied to the finance lease liability and the liability decreases over the lease term as cash payments are made. For operating leases, fixed lease expense is recognized over the lease term on a straight-line basis and variable lease expense is recognized in the period incurred.

A lease that is terminated before expiration of its lease term would result in a derecognition of the lease liability and ROU lease asset, with the difference recorded in the income statement, reflected as other gain (loss). If a plan has been

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committed to abandon an ROU lease asset at a future date before the end of its lease term, amortization of the ROU lease asset is accelerated based on its revised useful life. If an ROU lease asset is abandoned with immediate effect and the carrying value of the ROU lease asset is determined to be unrecoverable, an impairment loss is recognized on the ROU lease asset.

Financing Costs

Debt discounts and premiums as well as debt issuance costs (except for revolving credit arrangements) are presented net against the associated debt on the balance sheet and amortized into interest expense using the effective interest method over the contractual term or expected life of the debt instrument. Costs incurred in connection with revolving credit arrangements are recorded as deferred financing costs in other assets, and amortized on a straight-line basis over the expected term of the credit facility.

Property Operating Income

Property operating income includes the following:

Lease Income

The Company's lease income is composed of (i) fixed lease income for rents, and for interconnection services and a committed amount of power related to contracted data center leased space; and (ii) variable lease income for tenant reimbursements, resident fee income from senior housing operating facilities, and additional metered power reimbursements based upon usage by data center tenants at prevailing rates. As lessor, the Company made the accounting policy election to treat the lease and nonlease components in a lease contract as a single component to the extent that the timing and pattern of transfer are similar for the lease and nonlease components and the lease component qualifies as an operating lease. Accordingly, the nonlease components of tenant reimbursements for net leases, ancillary services within resident fee income, and interconnection services and payments for power by data center tenants are combined with their respective lease components and accounted for as a single lease component as the lease component is predominant.

Rental Income and Tenant Reimbursements

Rental income is recognized on a straight-line basis over the noncancelable term of the related lease which includes the effects of minimum rent increases and rent abatements under the lease. Rents received in advance are deferred.

In net lease arrangements, the tenant is generally responsible for operating expenses relating to the property, including real estate taxes, property insurance, maintenance, repairs and improvements. Costs reimbursable from tenants and other recoverable costs are recognized as revenue in the period the recoverable costs are incurred. When the Company is the primary obligor with respect to purchasing goods and services for property operations and has discretion in selecting the supplier and retains credit risk, tenant reimbursement revenue and property operating expenses are presented on a gross basis in the statements of operations. For net leases where the lessee self-manages the property, hires its own service providers and retains credit risk for routine maintenance contracts, no reimbursement revenue and expense are recognized. For property taxes and insurance, amounts paid directly by lessees to third parties on behalf of the Company are not recognized in the statement of operations, while amounts paid by the Company and reimbursed by lessees are presented gross as property operating income and expenses. Also, sales and similar taxes assessed by a governmental authority that is imposed on specific lease income producing transactions are netted against related collections from lessees.

When it is determined that the Company is the owner of tenant improvements, the cost to construct the tenant improvements, including costs paid for or reimbursed from the tenants, is capitalized. For Company-owned tenant improvements, the amounts funded by or reimbursed from the tenants are recorded as deferred revenue, which is amortized on a straight-line basis as additional rental income over the term of the related lease. Rental income recognition commences when the leased space is substantially ready for its intended use and the tenant takes possession of the leased space.

When it is determined that the tenant is the owner of tenant improvements, the Company's contribution towards those improvements is recorded as a lease incentive, included in deferred leasing costs and intangible assets on the balance sheet, and amortized as a reduction to rental income on a straight-line basis over the term of the lease. Rental income recognition commences when the tenant takes possession of the lease space.

Collectability—The Company evaluates collectability of lease payments based upon the creditworthiness of the lessee and recognizes lease income only to the extent collection of all amounts due over the life of the lease is determined to be probable. If collection is subsequently determined to no longer be probable, any previously accrued lease income that has not been collected is subject to reversal. If collection is subsequently determined to be probable,

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lease income and corresponding receivable would be reestablished to an amount that would have been recognized if collection had always been deemed to be probable. On January 1, 2019, the Company recorded $4.5 million increase to accumulated deficit to reverse certain operating lease receivables for which collection was determined to be not probable upon adoption of ASC 842, Leases

Costs to Execute Lease—Only incremental costs of obtaining a lease, such as leasing commissions, qualify as initial direct leasing costs to be capitalized. Indirect costs such as allocated overhead, certain legal fees and negotiation costs are expensed as incurred.

Resident Fee Income

Resident fee income is earned from senior housing operating facilities that operate through management agreements with independent third-party operators. Resident fee income related to independent living and assisted living facilities is recorded when services are rendered based on terms of their respective lease agreements.

Data Center Service Revenue

The Company earns data center service revenue, primarily composed of cloud services, data storage, data protection, network services, software licensing, and other related information technology services, which are recognized as services are provided to data center customers; and to a lesser extent, installation services that are recognized at a point in time upon completion of the installation and accompanying services.

Hotel Operating Income

Hotel operating income includes room revenue, food and beverage sales and other ancillary services. Revenue is recognized upon occupancy of rooms, consummation of sales and provision of services.

Fee Income

Fee income consists primarily of the following:

Base Management Fees—The Company earns base management fees for the administration of its managed private funds, and for the management of traded and non-traded REITs and other investment vehicles, including management of their investments, which constitute a series of distinct services satisfied over time. Base management fees are recognized over the life of the investment vehicle as services are provided.

Asset Management Fees—The Company receives a one-time asset management fee upon closing of each investment made by certain managed private funds. The underlying services of managing the investments of the private funds consist of a series of distinct services satisfied over time, for which asset management fees are recognized ratably over the life of each investment as services are rendered. On January 1, 2018, the Company recorded a $1.6 million increase to accumulated deficit to reflect a change in the timing of revenue recognition for asset management fees upon adoption of ASC 606, Revenue from Contracts with Customers.

Acquisition and Disposition Fees—Through January 31, 2018, the Company earned fees related to acquisition and disposition of investments by certain managed non-traded REITs, which were recognized upon closing of the respective acquisition or disposition of underlying investments.

Incentive Fees—The Company may earn incentive fees from its managed private funds and traded REITs. Incentive fees are determined based upon the performance of the investment vehicles subject to the achievement of minimum return hurdles in accordance with the terms set out in the respective governing agreements. Incentive fees take the form of a contractual fee arrangement with the investment vehicles, and unlike carried interests, do not represent an allocation of returns among equity holders of the investment vehicles. Incentive fees are a form of variable consideration and are recognized when it is probable that a significant reversal of the cumulative revenue will not occur, which is generally at the end of the performance measurement period of the respective investment vehicles.

Other Income

Recurring other income includes primarily the following:

Expense Recoveries from Borrowers—Expenses, primarily legal costs incurred in administering non-performing loans and foreclosed properties held by investment entities, may be subsequently recovered through payments received when these investments are resolved. The Company recognizes income when the cost recoveries are determinable and repayment is assured.

Cost Reimbursements from Affiliates—For various services provided to certain affiliates, including managed investment vehicles, the Company is entitled to receive reimbursements of expenses incurred, generally based on

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expenses that are directly attributable to providing those services and/or a portion of overhead costs. The Company acts in the capacity of a principal under these arrangements. Accordingly, the Company records the expenses and corresponding reimbursement income on a gross basis in the period the services are rendered and costs are incurred.

Equity Awards Granted by Managed Companies—These are equity awards granted to the Company to be granted to its employees or directly to employees of the Company by publicly-traded REITs managed by the Company, NRE, prior to its sale in September 2019, and CLNC. The initial grant is recorded as an other asset and deferred income liability on the balance sheet. The liability is amortized on a straight-line basis to other income over the initial vesting period of the award and equity-based compensation expense is recognized as the award vests to the recipient employee.

Compensation

Compensation comprises salaries, bonus including discretionary awards and contractual amounts for certain senior executives, benefits, severance payments, equity-based compensation and performance-based compensation. Bonus is accrued over the employment period to which it relates.

Carried Interest and Incentive Fee Compensation—This represents a portion of carried interest and incentive fees earned by the Company that are allocated (generally 40% to 50%) to senior management, investment professionals and certain other employees of the Company. Carried interest and incentive fee compensation are generally recorded as the related carried interest and incentive fees are recognized in earnings by the Company. Carried interest compensation amounts may be reversed if there is a decline in the cumulative carried interest amounts previously recognized by the Company. Carried interest and incentive fee compensation are generally not paid to management or other employees until the related carried interest and incentive fee amounts are distributed by the investment vehicles to the Company.

Equity-Based Compensation—Equity-classified stock awards granted to employees and non-employees that have a service condition and/or a market or performance condition are measured at fair value at date of grant and remeasured at fair value only upon a modification of the award.

A modification in the terms or conditions of an award, unless the change is non-substantive, represents an exchange of the original award for a new award. The modified award is revalued and incremental compensation cost is recognized for the excess, if any, between fair value of the award upon modification and fair value of the award immediately prior to modification. Total compensation cost recognized for a modified award, however, cannot be less than its grant date fair value, unless at the time of modification, the service or performance condition of the original award was not expected to be satisfied.

Liability-classified stock awards are remeasured at fair value at the end of each reporting period until the award is fully vested.

Compensation expense is recognized on a straight-line basis over the requisite service period of each award, with the amount of compensation expense recognized at the end of a reporting period at least equal the portion of fair value of the respective award at grant date or modification date, as applicable, that has vested through that date. For awards with a performance condition, compensation expense is recognized only if and when it becomes probable that the performance condition will be met, with a cumulative adjustment from service inception date, and conversely, compensation cost is reversed to the extent it is no longer probable that the performance condition will be met. For awards with a market condition, compensation cost is not reversed if a market condition is not met so long as the requisite service has been rendered, as a market condition does not represent a vesting condition. Compensation expense is adjusted for actual forfeitures upon occurrence.

Income Taxes

A REIT is generally not subject to corporate-level federal and state income tax on net income it distributes to its stockholders. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement to distribute at least 90% of its REIT taxable income to its stockholders. If the Company fails to qualify as a REIT in any taxable year and if the statutory relief provisions were not to apply, the Company would be subject to federal and state income taxes at regular corporate rates and may not be able to qualify as a REIT for four subsequent taxable years. Even if the Company qualifies as a REIT, it and its subsidiaries may be subject to certain U.S federal, state and local as well as foreign taxes on its income and property and to U.S federal income and excise taxes on its undistributed taxable income.

The Company has elected or may elect to treat certain of its existing or newly created corporate subsidiaries as taxable REIT subsidiaries (each a “TRS”). In general, a TRS may perform non-customary services for tenants of the REIT, hold assets that the REIT cannot or does not intend to hold directly and, subject to certain exceptions related to hotels and healthcare properties, may engage in any real estate or non-real estate related business. The Company uses TRS entities

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to conduct certain activities that cannot be conducted directly by a REIT, such as investment management, property management including hotel and healthcare operations as well as loan servicing and workout activities. A TRS is treated as a regular, taxable corporation for U.S income tax purposes and therefore, is subject to U.S federal corporate tax on its income and property. Additionally, the Company has invested in real estate assets in foreign countries for which related earnings or other measures are subject to income taxes in the respective foreign jurisdictions, and in some cases, the repatriation of earnings are subject to withholding taxes.

Deferred Income Taxes—The provision for income taxes includes current and deferred portions. The current income tax provision differs from the amount of income tax currently payable because of temporary differences in the recognition of certain income and expense items between financial reporting and income tax reporting. The Company uses the asset and liability method to provide for income taxes, which requires that the Company's income tax expense reflect the expected future tax consequences of temporary differences between the carrying amounts of assets or liabilities for financial reporting versus income tax purposes. Accordingly, a deferred tax asset or liability for each temporary difference is determined based on enacted tax rates that the Company expects to be in effect when the underlying items of income and expense are realized and the differences reverse. A deferred tax asset is also recognized for net operating loss ("NOL") carryforwards and the income tax effect of AOCI items of the TRS and foreign taxable entities. A valuation allowance for deferred tax assets is established if the Company believes it is more likely than not that all or some portion of the deferred tax assets will not be realized. Realization of deferred tax assets is dependent on the Company's TRS and foreign taxable entities generating sufficient taxable income in future periods or employing certain tax planning strategies to realize such deferred tax assets.

Uncertain Tax Positions—Income tax benefits are recognized for uncertain tax positions that are more likely than not to be sustained based solely on their technical merits. Such uncertain tax positions are measured as the largest amount of benefit that is more likely than not to be realized upon settlement. The difference between the benefit recognized and the tax benefit claimed on a tax return results in an unrecognized tax benefit. The Company periodically evaluates whether it is more likely than not that its uncertain tax positions would be sustained upon examination by a tax authority for all open tax years, as defined by the statute of limitations.

Earnings Per Share

The Company calculates basic earnings per share ("EPS") using the two-class method which defines unvested share based payment awards that contain nonforfeitable rights to dividends as participating securities. The two-class method is an allocation formula that determines EPS for each share of common stock and participating securities according to dividends declared and participation rights in undistributed earnings. Under this method, all earnings (distributed and undistributed) are allocated to common shares and participating securities based on their respective rights to receive dividends. EPS is calculated by dividing earnings allocated to common shareholders by the weighted-average number of common shares outstanding during the period.

Diluted EPS is based on the weighted-average number of common shares and the effect of potentially dilutive common share equivalents outstanding during the period. Potentially dilutive common share equivalents include shares to be issued upon the assumed conversion of the Company's outstanding convertible notes, which are included under the if-converted method when dilutive. The earnings allocated to common shareholders is adjusted to add back the after-tax amount of interest expense associated with the convertible notes, except when doing so would be antidilutive.

Reclassifications

Reclassifications were made related to discontinued operations as discussed in "—Discontinued Operations" above and to prior period segment reporting presentation as discussed in Note 23. Additionally, interest receivable, which was included in other assets at December 31, 2019, has been reclassified to be presented as part of loans receivable to conform to current period presentation. These reclassification did not affect the Company's financial position, results of operations or cash flows.

Accounting Standards Adopted in 2020

Credit Losses

In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU No. 2016-13, Financial Instruments—Credit Losses, followed by subsequent amendments, which modifies the credit impairment model for financial instruments, and codified as ASC Topic 326. The multiple existing incurred loss models are replaced with a lifetime current expected credit loss ("CECL") model for off-balance sheet credit exposures that are not unconditionally cancellable by the lender and financial instruments carried at amortized cost, such as loans, loan commitments, held-to-maturity ("HTM") debt securities, financial guarantees, net investment in sales-type and direct financing leases, reinsurance and trade

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receivables. Targeted changes are also made to the impairment model of AFS debt securities which are not within the scope of CECL.

The CECL model, in estimating expected credit losses over the life of a financial instrument at the time of origination or acquisition, considers historical loss experience, current conditions and the effects of a reasonable and supportable expectation of changes in future macroeconomic conditions. Recognition of allowance for credit losses under the CECL model will generally be accelerated as it encompasses credit losses over the full remaining expected life of the affected financial instruments. For collateralized financial assets, measurement of credit losses under CECL is based on fair value of the collateral if foreclosure is probable or if the collateral-dependent practical expedient is elected for financial assets expected to be repaid substantially through operation or sale of the collateral when the borrower is experiencing financial difficulty. The accounting model for purchased credit-impaired loans and debt securities will be simplified to be consistent with the CECL model for originated and purchased non-credit-impaired assets. For AFS debt securities, unrealized credit losses will be recognized as allowances rather than reductions in amortized cost basis and elimination of the OTTI concept will result in more frequent estimation of credit losses. ASC 326 also requires expanded disclosures on credit risk, including credit quality indicators by vintage of financing receivables.

Transitional relief is provided through the ability, upon adoption of the new standard, to elect the fair value option for eligible financial instruments within the scope of the new standard, except for HTM and AFS debt securities. Transition will generally be on a modified retrospective basis, including the election of the fair value option, with a cumulative effect adjustment to beginning retained earnings, except for prospective application of the CECL model for other than temporarily impaired debt securities and purchased credit-impaired assets.

The Company adopted the new standard on January 1, 2020. The Company elected the fair value option for all of its outstanding loans receivable, with a cumulative effect adjustment to decrease beginning accumulated deficit by $3.3 million. Under the fair value option, the loans receivable are measured at each reporting period based upon their exit values in an orderly transaction and unrealized gains or losses from changes in fair value are recorded in other gain (loss) on the consolidated statement of operations. The loans are no longer subject to evaluation for impairment through an allowance for loan loss as such losses are captured through fair value changes. Additionally, there is no longer an amortization of loan origination fees or discounts on purchased loans as additional interest income.

The Company had no debt securities with unrealized loss in AOCI at December 31, 2019 and accordingly, there was no impact upon adoption of the new standard. As it relates to the Company's other accounts receivable that are subject to CECL, the effect of adoption was immaterial.

The Company reflected the effect of adoption of CECL by its equity method investee, CLNC, through an adjustment to increase beginning accumulated deficit by approximately $8.5 million on January 1, 2020, representing the Company's share of CLNC's cumulative effect adjustment.

Fair Value Disclosures

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurements. The ASU requires new disclosures of changes in unrealized gains and losses in other comprehensive income for recurring Level 3 fair value measurements of instruments held at balance sheet date, as well as the range and weighted average or other quantitative information, if more relevant, of significant unobservable inputs for recurring and nonrecurring Level 3 fair values. Certain previously required disclosures are eliminated, specifically around the valuation process required for Level 3 fair values, policy for timing of transfers between levels of the fair value hierarchy, as well as amounts and reason for transfers between Levels 1 and 2. Additionally, the new guidance clarifies or modifies certain existing disclosures, including clarifying that information about measurement uncertainty of Level 3 fair values should be as of reporting date and requiring disclosures of the timing of liquidity events for investments measured under the NAV practical expedient, but only if the investee has communicated this information or has announced it publicly. The provisions on new disclosures and modification to disclosure of Level 3 measurement uncertainty are to be applied prospectively, while all other provisions are to be applied retrospectively. The Company adopted ASU No. 2018-13 on January 1, 2020.

Related Party Guidance for VIEs

In November 2018, the FASB issued ASU No. 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities. The ASU amends the VIE guidance to align, throughout the VIE model, the evaluation of a decision maker's or service provider's fee held by a related party, whether or not they are under common control, in both the assessment of whether a fee qualifies as a variable interest and the determination of a primary beneficiary. Specifically, a decision maker or service provider considers interests in a VIE held by a related party under common control only if it has a direct interest in that related party under common control and considers such indirect interest in the

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VIE held by the related party under common control on a proportionate basis, rather than in its entirety. Transition is generally on a modified retrospective basis, with the cumulative effect adjusted to retained earnings at the beginning of the earliest period presented. The Company adopted ASU No. 2018-17 on January 1, 2020, with no transitional impact upon adoption.

Reference Rate Reform

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The guidance in Topic 848 is optional, the election of which provides temporary relief for the accounting effects on contracts, hedging relationships and other transactions affected by the transition from interbank offered rates (such as the London Interbank Offered Rate ("LIBOR")) that are expected to be discontinued by the end of 2021 to alternative reference rates (such as the Secured Overnight Financing Rate ("SOFR")). Modification of contractual terms to effect the reference rate reform transition on debt, leases, derivatives and other contracts is eligible for relief from modification accounting and accounted for as a continuation of the existing contract. Topic 848 is effective upon issuance through December 31, 2022, and may be applied retrospectively to January 1, 2020. The Company has elected to apply the hedge accounting expedients related to probability and assessment of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives, which preserves existing derivative treatment and presentation. The Company may elect other practical expedients or exceptions as applicable over time as reference rate reform activities occur.

Future Application of Accounting Standards

Income Tax Accounting

In December 2019, the FASB issued ASU No. 2019-12, Simplifying Accounting for Income Taxes. The ASU simplifies accounting for income taxes by eliminating certain exceptions to the general approach in ASC 740, Income Taxes, and clarifies certain aspects of the guidance for more consistent application. The simplifications relate to intraperiod tax allocations when there is a loss in continuing operations and a gain outside of continuing operations, accounting for tax law or tax rate changes and year-to-date losses in interim periods, recognition of deferred tax liability for outside basis difference when investment ownership changes, and accounting for franchise taxes that are partially based on income. The ASU also provides new guidance that clarifies the accounting for transactions resulting in a step-up in tax basis of goodwill, among other changes. Transition is generally prospective, other than the provision related to outside basis difference which is on a modified retrospective basis with cumulative effect adjusted to retained earnings at the beginning of the period adopted, and franchise tax provision which is on either full or modified retrospective. ASU No. 2019-12 is effective January 1, 2021, with early adoption permitted in an interim period, to be applied to all provisions. The Company is currently evaluating the impact of this new guidance.

Accounting for Certain Equity Investments

In January 2020, the FASB issued ASU No. 2020-01, Clarifying the Interactions between Topic 321 Investments—Equity Securities, Topic 323—Investments Equity Method and Joint Ventures, and Topic 815—Derivatives and Hedging. The ASU clarifies that if as a result of an observable transaction, an equity investment under the measurement alternative is transitioned into equity method and vice versa, an equity method investment is transitioned into measurement alternative, the investment is to be remeasured immediately before and after the transaction, respectively. The ASU also clarifies that certain forward contracts or purchased options to acquire equity securities that are not deemed to be derivatives or in-substance common stock will generally be measured using the fair value principles of ASC 321 before settlement or exercise, and that an entity should not be considering how it will account for the resulting investments upon eventual settlement or exercise. ASU No. 2020-01 is to be applied prospectively, effective January 1, 2021, with early adoption permitted in an interim period. The Company is currently evaluating the impact of this new guidance.

Accounting for Convertible Instruments and Contracts on Entity's Own Equity

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt With Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU (1) simplifies an issuer’s accounting for convertible instruments as a single unit of account; (2) allows more contracts on an entity’s own equity to qualify for equity classification and more embedded derivatives meeting the derivative scope exception; and (3) simplifies diluted EPS computation.

•The guidance eliminates the requirement to separate embedded conversion features in convertible instruments, except for (1) a convertible instrument that contains features requiring bifurcation as a derivative under ASC 815

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or (2) a convertible debt instrument that was issued at a substantial premium. Separate accounting for embedded conversion features as an equity component under the cash conversion and beneficial conversion models has been eliminated.

•Under the new guidance, certain conditions under Subtopic ASC 815-40 that may result in contracts being settled in cash rather than shares and therefore preclude (1) equity classification for contracts on an entity’s own equity; and (2) embedded derivatives from qualifying for the derivative scope exception, have been removed; for example, the requirement that equity contracts permit settlement in unregistered shares unless such contracts explicitly require settlement in cash if registered shares are unavailable. The guidance also clarifies that freestanding contracts on an entity’s own equity that do not qualify for equity classification under the indexation criteria (ASC 815-40-15) or settlement criteria (ASC 815-40-25) are to be measured at fair value through earnings, even if they do not meet the definition of a derivative under ASC 815.

•The ASU also amends certain guidance on computation of diluted EPS for convertible instruments and contracts on an entity’s own equity that results in a more dilutive EPS, including (1) requiring the if converted method to be applied for all convertible instruments (the treasury stock method is no longer available), and (2) removing the ability to rebut the presumption of share settlement for contracts that may be settled in cash or stock and that are not liability classified share based payments.

•Expanded disclosures are required, including but not limited to, (1) terms and features of convertible instruments and contracts on entity’s own equity; and (2) information about events, conditions, and circumstances that could affect amount or timing of future cash flows related to these instruments or contracts; and in the period of adoption (3) nature of and reason for the change in accounting principle; and (4) effects of the change on EPS.

Upon adoption, a one-time election may be made to apply the fair value option for any liability-classified convertible securities.

Adoption of the new standard may be made either on a full retrospective approach or a modified retrospective approach, with cumulative effect adjustment recorded to beginning retained earnings. ASU No. 2020-06 is effective January 1, 2022, with early adoption permitted on January 1, 2021. The Company is currently evaluating the effects of this new guidance.

3. Acquisitions

Business Combinations

DBH

On July 25, 2019, the Company acquired DBH in a combination of: (a) cash, a portion of which was deferred until the expiration of certain customary seller indemnification obligations and was paid in full in May 2020 (Note 20); and (b) issuance of 21,478,515 OP Units, which were measured based upon the closing price of the Company's class A common stock on July 24, 2019 of $5.21 per share.

The Company acquired the fee streams but not the equity interests related to the six portfolio companies managed by DBH. The principals of DBH retained their equity investments, including general partner interests in existing DBH investment vehicles and in Digital Colony Partners fund (“DCP”), which was previously co-sponsored by the Company and DBH.

The Company's acquisition of DBH included the remaining 50% equity interest held by DBH in Digital Colony Management, LLC ("DCM"), previously an equity method joint venture with DBH, which manages DCP. Upon closing of the acquisition, the Company obtained a controlling interest in DCM and remeasured its existing 50% interest at a fair value of $51.4 million. The full amount, representing the excess of fair value over carrying value of the Company's investment in DCM, was recognized in other gain on the Company's statement of operations, as the Company's carrying value of its investment in DCM prior to the business combination was nil. The fair value was based upon the value of 50% of estimated future net cash flows from the DCP fund management contract, discounted at 8%.

DataBank Colocation Data Centers

On December 20, 2019, the Company acquired from third party investors a 20% interest in DataBank, which operates edge colocation data centers in nine U.S. markets, owning eight properties, with leasehold interests in 12 properties. DataBank is a portfolio company managed by DBH and invested in by the principals and senior professionals of DBH. The Company is deemed to have a controlling interest in DataBank as control over the operations of DataBank resides substantially with the Company. Consideration included the payment of cash to third parties for the Company’s

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interests in DataBank and the issuance of 612,072 OP Units to the DBH principals, Marc Ganzi, the Company's CEO and President, and Ben Jenkins, now the chief investment officer of the Company’s digital real estate platform, for incentive units owned by the DBH principals and allocable to the Company’s acquired interests, measured based upon the closing price of the Company's class A common stock on December 20, 2019 of $4.84 per share. The OP Units were issued to the DBH principals who had previously received incentive units from DataBank, in exchange for certain of their incentive units such that the Company will not be subject to future carried interest payments to the DBH principals with respect to the Company's investment in DataBank (Note 20). The DBH principals otherwise retained their equity interests in DataBank.

Asset Acquisitions

Vantage SDC Hyperscale Data Centers

In July 2020 and following an additional investment in October 2020, the Company, alongside fee bearing third party capital, invested $1.36 billion for approximately 90% equity interest ($1.2 billion or approximately 80% upon initial acquisition in July 2020) in entities that hold Vantage Data Centers' ("Vantage") portfolio of 12 stabilized hyperscale data centers in North America and $2.0 billion of secured indebtedness (“Vantage SDC”). The remaining equity interest in Vantage SDC is held by the existing investors of Vantage, and together with the third party capital raised by the Company, represent noncontrolling interests. The Company's balance sheet investment is $197 million or 13% equity interest in Vantage SDC (approximately 12% upon initial acquisition in July 2020). Vantage SDC is a carve-out from Vantage's data center business, with the acquisition excluding Vantage's remaining portfolio of development-stage data centers and its employees, all of whom were retained by Vantage. The day-to-day operations of Vantage SDC continues to be managed by Vantage's existing management company in exchange for management fees, and subject to certain approval rights held by the Company and the co-investors in connection with material actions. Additionally, the Company and its co-investors have committed to acquire the future build-out of expansion capacity within the Vantage SDC portfolio, including lease up of the expanded capacity and existing inventory, the costs of which will be borne by the existing owners of Vantage SDC, for estimated payments of approximately $240 million. It is anticipated that all, if not most, of the payments will be funded by Vantage SDC from borrowings under its credit facilities and/or cash from operations.

zColo Colocation Data Centers

In December 2020, the Company's DataBank subsidiary acquired zColo, the colocation assets of Zayo Group Holdings, Inc. ("Zayo"), composed of 39 data centers in the U.S. and U.K., for approximately $1.2 billion through a combination of debt and equity financing, including $0.5 billion of third party co-invest capital raised by the Company. The Company's balance sheet investment was $188 million (decreased to approximately $145 million upon raising of additional third party capital in February 2021, which maintains the Company's 20% equity interest in DataBank). Acquisition of zColo's remaining five data centers in France for $33.0 million closed in February 2021, and had been separately funded into escrow concurrent with the December closing. Zayo will continue to be an anchor tenant within the zColo facilities and will become a significant customer of DataBank.

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Allocation of Consideration Transferred

The following table summarizes the consideration and allocation to assets acquired, liabilities assumed and noncontrolling interests at acquisition. Consideration for asset acquisitions incorporates capitalized transaction costs, which includes incentive payments to employees for successful closing of the acquisitions.


	Business Combinations in 2019				Asset Acquisitions in 2020
(In thousands)	DBH		DataBank (1)		Vantage SDC		zColo
Consideration
Cash	$	181,167	$	182,731	$	1,524,610	$	1,181,488
Deferred consideration	35,500		—		—		—
OP Units issued	111,903		2,962		—		—
Total consideration for equity interest acquired	328,570		185,693		1,524,610		1,181,488

Fair value of equity interest in Digital Colony Manager	51,400		—		—		—
	$	379,970	$	185,693	$	1,524,610	$	1,181,488

Assets acquired, liabilities assumed and noncontrolling interests
Cash	$	—	$	10,366	$	—	$	266
Real estate	—		839,053		2,720,870		882,327
Assets held for disposition	—		29,266		—		—
Intangible assets	153,300		219,651		765,137		303,119
ROU lease and other assets	13,008		108,896		181,260		415,038
Debt	—		(539,155)		(2,060,307)		—
Tax liabilities	(17,392)		(100,759)		—		—
Intangible, lease and other liabilities	(16,194)		(120,178)		(82,350)		(419,262)
Fair value of net assets acquired	132,722		447,140		1,524,610		1,181,488
Noncontrolling interests in investment entities	—		(724,567)		—		—
Goodwill	$	247,248	$	463,120	$	—	$	—

__________

(1) In 2020, adjustments were made to the purchase price allocation of DataBank during its one year measurement period based upon information obtained about facts and circumstances that existed at the time of closing. This includes an $8.8 million decrease to deferred tax liabilities in the fourth quarter of 2020 based upon the final 2019 tax provision for DataBank.

•Real estate was valued based upon (i) current replacement cost for buildings in an as-vacant state and improvements, estimated using construction cost guidelines; (ii) current replacement cost for data center infrastructure by applying an estimated cost per kilowatt based upon current capacity of each location and also considering the associated indirect costs such as design, engineering, construction and installation; (iii) recent comparable sales or current listings for land; and (iv) contracted price net of selling cost for real estate held for sale. Useful lives of real estate acquired ranges from 25 to 50 years for buildings and improvements, 5 to 21 years for site improvements, 10 to 19 years for data center infrastructure, and 1 to 5 years for furniture, fixtures and equipment.

•The investment management intangible assets of DBH were composed of the following:

•Management contracts are valued based upon estimated net cash flows generated from the contracts, including the Company's 50% interest in Digital Colony Manager, discounted at 8%, with remaining term of the contracts ranging between 3 and 10 years.

•Investor relationships—represent the fair value of potential investment management fees, net of operating costs, to be generated from repeat DBH investors in future sponsored vehicles, discounted at 11.5%, and potential carried interest discounted at 25%, with estimated useful life of 10 years.

•Lease related intangibles for real estate acquisitions were composed of the following:

•In-place leases reflect the value of rental income forgone if the properties were acquired vacant, and the leasing commissions, legal and marketing costs that would have been incurred to lease up the properties, with remaining lease terms ranging between 1 and 15 years.

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•Above- and below-market leases represent the rent differential for the remaining lease term between contractual rents of acquired leases and market rents at the time of acquisition, discounted at rates between 6% and 8%, with remaining lease terms ranging between 1 and 15 years.

•Tenant relationships represent the estimated net cash flows attributable to the likelihood of lease renewal by an existing tenant relative to the cost of obtaining a new lease, taking into consideration the time it would require to execute a new lease or backfill a vacant space, discounted at rates between 6% and 8%, with estimated useful lives between 5 and 15 years.

•Other intangible assets acquired were as follows:

•Customer service contracts are valued based upon estimated net cash flows generated from the DataBank and zColo customer service contracts that would have been forgone if such contracts were not in place, taking into consideration the time it would require to execute a new contract, with remaining term of the contracts ranging between 1 and 15 years.

•Customer relationships are valued as the incremental net cash flows to the DataBank and zColo businesses that is attributable to the in-place customer relationships, discounted at either 9.5% or 10%, with estimated useful lives of 12 years.

•Trade names of Digital Bridge, DataBank and zColo are valued based upon estimated savings from avoided royalty at a royalty rate of either 1% or 2%, discounted at rates between 9.5% and 11.5%, with useful lives between 1 and 10 years.

•Assembled workforce is valued based upon the estimated cost of recruiting and training new data center level employees for zColo, with a 3 year useful life.

•Other assets acquired and liabilities assumed include primarily ROU lease assets associated with leasehold data centers and DBH corporate offices, corresponding lease liabilities, and deferred revenues. Lease liabilities are measured based upon the present value of future lease payments over the lease term, discounted at the incremental borrowing rate of the respective acquirees. Deferred tax liabilities recognized upon acquisition represent the tax effect on book-to-tax basis difference, associated with DataBank real estate assets and DBH management contract intangibles.

•Assumed debt were valued based upon market rates and spreads that prevailed at the time of acquisition for debt with similar terms and remaining maturities.

•Noncontrolling interests in investment entities were valued based upon their proportionate share of the respective net assets at fair value.

•In a business combination, the excess of the fair value of consideration transferred over the fair value of identifiable assets acquired, liabilities assumed and noncontrolling interests, is recorded as goodwill. The DBH and DataBank goodwill are each assigned to the Digital IM and Digital Operating segments, respectively. The DBH acquisition is a strategic transaction that is expected to generate meaningful accretion in value to the Company through expansion of the digital investment management platform by combining the industry sector knowledge, experience and relationships from the DBH team with the capital raising resources of the Company, as represented by the value of the DBH goodwill. The DataBank goodwill represents the value embodied in the potential for future customers, revenue and profit growth in the colocation business, and industry knowledge, experience and relationships contributed by the DataBank management team. In an asset acquisition, the cost of the assets acquired and liabilities assumed is allocated based upon their relative fair value and does not give rise to goodwill.

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Other Real Estate Asset Acquisitions

The following table summarizes the Company's other real estate asset acquisitions in addition to those discussed above:


($ in thousands)					Purchase Price Allocation (1)
Acquisition Date	Property Type and Location	Number of Properties	Purchase Price (1)		Land		Buildings and Improvements		Lease-Related Intangible Assets		ROU Lease and Other Assets		Debt		Intangible, Lease and Other Liabilities
2020 (2)
Various	Hotel—France (3)	9	$	37,916	$	5,243	$	34,038	$	—	$	43,503	$	(2,245)	$	(42,623)
Various	Easements—Various in U.S. (4)	—	2,586		2,586		—		—		—		—		—
October	Office—U.K. and Ireland (5)	5	32,975		57,222		67,113		5,383		33,054		(124,981)		(4,816)
December	Land—U.S	—	5,116		5,116		—		—		—		—		—
			$	78,593	$	70,167	$	101,151	$	5,383	$	76,557	$	(127,226)	$	(47,439)
2019
February	Bulk industrial—Various in U.S. (6)	6	$	373,182	$	49,446	$	296,348	$	27,553	$	—	$	—	$	(165)
October	Wellness infrastructure—U.K. (7)	1	12,376		3,478		9,986		732		—		—		(1,820)
Various	Light industrial—Various in U.S. (6)	84	1,158,423		264,816		850,550		47,945		—		—		(4,888)
			$	1,543,981	$	317,740	$	1,156,884	$	76,230	$	—	$	—	$	(6,873)

__________

(1) Purchase price includes capitalized transaction costs. Dollar amounts of purchase price and allocation to assets acquired and liabilities assumed are translated using foreign exchange rates as of the respective dates of acquisition, where applicable.

(2) Useful lives are 40 years for buildings, 12 to 15 years for site improvements, 7 years for furniture, fixtures, and equipment, 9 to 11 years for lease related intangibles, and 5 to 44 years for ROU lease assets.

(3) Bids for hotels under receivership were accepted by the French courts in prior years, with the transactions closing in 2020. Amounts include acquisition of hotel operations pursuant to operating leases on real estate owned by third parties.

(4) Transferred to the Company's new sponsored fund, Digital Colony Partners II, LP or DCP II, in December 2020.

(5) The Company acquired a controlling equity interest in a borrower upon default of its ADC loan, which was previously accounted for as an equity method investment. This resulted in the acquisition of the borrower's real estate assets and assumption of its underlying mortgage debt, some of which are in default.

(6) The light and bulk industrial portfolios were sold in December 2019 and 2020, respectively.

(7) Wellness infrastructure properties in the United Kingdom (U.K.) were acquired pursuant to a purchase option under the Company's development facility to a healthcare operator at a purchase price equivalent to the respective outstanding loan balance.

4. Real Estate

The following table summarizes the Company's real estate held for investment. Real estate held for disposition is presented in Note 8.


(In thousands)	December 31, 2020		December 31, 2019
Land	$	834,918	$	716,340
Buildings and improvements	4,907,213		5,068,639

Tenant improvements	115,592		105,440
Data center infrastructure	3,396,854		595,603
Furniture, fixtures and equipment	87,380		98,839
Construction in progress	84,384		115,933
	9,426,341		6,700,794
Less: Accumulated depreciation	(698,421)		(482,598)
Real estate assets, net (1)	$	8,727,920	$	6,218,196

__________

(1) For real estate acquired in a business combination, the purchase price allocation may be subject to adjustments during the measurement period, not to exceed 12 months from date of acquisition, based upon new information obtained about facts and circumstances that existed at time of acquisition (Note 3).

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Real Estate Sales

Results from sales of real estate, including discontinued operations (Note 16), are as follows:


	Year Ended December 31,
(In thousands)		2020		2019		2018
Proceeds from sales of real estate		$	431,198	$	6,108,153	$	864,347
Gain on sale of real estate		41,922		1,520,808		167,231

Depreciation and Impairment

The following table summarizes real estate depreciation and impairment.


	Year Ended December 31,
(In thousands)		2020		2019		2018
Depreciation of real estate held for investment		$	276,104	$	177,585	$	185,606
Impairment of real estate and related asset group (1)
Held for disposition		179,666		120,329		77,211
Held for investment (2)		1,777,698		227,510		280,418

__________

(1) Includes impairment of real estate intangibles of $9.6 million, $0.9 million and $12.7 million in 2020, 2019 and 2018, respectively, and impairment of ROU on ground leases of $15.1 million in 2020.

(2) Includes impairment recorded on properties in the Hospitality segment and THL Hotel Portfolio in the Other segment prior to their reclassification as held for sale and discontinued operations.

Impairment of Real Estate Held for Disposition

Real estate held for disposition is carried at the lower of amortized cost or fair value. Real estate that has been written down and carried at fair value totaled $1.6 billion at December 31, 2020 (including properties in the THL Hotel Portfolio that were impaired upon classification as held for sale and discontinued operations) and $253.4 million at December 31, 2019, generally representing Level 3 fair values.

Real estate held for disposition that was written down was generally valued using either broker opinions of value, or a combination of market information, including third-party appraisals and indicative sale prices, adjusted as deemed appropriate by management to account for the inherent risk associated with specific properties. In all cases, fair value of real estate held for disposition is reduced for estimated selling costs ranging from 1% to 3%.

In 2020, the Company also considered the impact of a global economic downturn as a result of COVID-19, specifically as it affects real estate values, and where appropriate, factored in a reduction in potential sales prices, which resulted in additional impairment on real estate held for disposition in 2020.

Impairment of Real Estate Held for Investment

Real estate held for investment that was written down to fair value in 2020 and 2019 had carrying values totaling $3.2 billion (including properties in the Hospitality segment as they were impaired prior to their reclassification as held for sale and discontinued operations) and $355.0 million, respectively, at the time of impairment, representing Level 3 fair values.

Impairment was driven predominantly by shortened hold period assumptions, particularly in the hotel and wellness infrastructure portfolios, and, in each case, such determination was made in connection with the review and preparation of the financial statements. The shortened hold period assumption is attributable to both the Company's accelerated digital transformation, and the risk that the Company is unable to obtain accommodation from lenders on non-recourse mortgage debt that is in default or were at risk of default. The Company's assessment considered various strategic and financial alternatives to maximize the value of its non-digital real estate assets, while also balancing the need to preserve liquidity and prioritize the growth of its digital business. A shortened hold period was an indicator of impairment as it decreased the amount of carrying value recoverable from future cash flows, which was further exacerbated by a decline in property operating performance and market values as a result of the economic effects of COVID-19.

The Company compared the carrying values to the undiscounted future net cash flows expected to be generated by these properties over their hold periods. In performing this analysis, the Company considered the likelihood of possible outcomes under various hold period scenarios by applying a probability-weighted approach to different hold periods. For hotel properties, the Company applied a range of reductions to near term cash flow projections to account for uncertainties due to COVID-19. For properties for which undiscounted expected net cash flows over their respective hold

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periods fell short of carrying values, the Company expects that the carrying value of these properties would likely not be recoverable.

Fair values were estimated for these properties based upon one or a combination of the following: (i) third party appraisals, (ii) broker opinions of value with discounts applied based upon management judgment, (iii) income capitalization approach, using net operating income for each property and applying capitalization rates between 10.0% and 12.0%; or (iv) discounted cash flow analyses with terminal values determined using terminal capitalization rates between 7.3% and 11.3%, and discount rates between 8.5% and 9.5%. The Company considered the risk characteristics of each property in determining capitalization rates and where applicable, used higher capitalization rates or discount rates to reflect the inherent stress on real estate values in a deteriorating economic environment. Impairment was measured as the excess of carrying value over fair value for each of these properties.

The Company believes that it has materially addressed overall recoverability in the value of its non-digital real estate assets, applying the Company's best estimates and assumptions at this time based upon external factors known to date and the Company's expected digital transformation timeline. If the extent and duration of the economic effects of COVID-19 negatively affect the Company's real estate operations and its ability to meet its non-recourse mortgage debt obligations beyond the Company's current projections, the estimates and assumptions currently applied by the Company may change, which may lead to further impairment of its non-digital real estate assets, in particular, its wellness infrastructure assets, that could be material in the future.

Property Operating Income

Property operating income presented below excludes amounts related to discontinued operations (Note 16).

For the year ended December 31, 2018, property operating income was composed of $0.8 billion of lease income and $10.6 million of hotel operating income.

For the years ended December 31, 2020 and 2019, components of property operating income are as follows:


	Year Ended December 31,
(In thousands)		2020		2019
Lease income:
Fixed lease income		$	768,914	$	657,407
Variable lease income		113,680		57,575
		882,594		714,982
Hotel operating income		8,688		16,344
Data center service revenue		44,878		6,038
		$	936,160	$	737,364

Lease Concessions Related to COVID-19

As a result of the COVID-19 crisis, a number of tenants failed to make rent payments or make timely payments, and some sought more flexible payment terms or rent concessions. Local governments in certain jurisdictions have implemented or are considering implementing programs that permit or require forbearance of rent payments by tenants affected by COVID-19. The Company is currently engaged with affected tenants on a case-by-case basis to evaluate and respond to the current environment.

For lease concessions resulting directly from the impact of COVID-19 that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee, for example, where total payments required by the modified contract will be substantially the same as or less than the original contract, the Company made a policy election to account for the concessions as though the enforceable rights and obligations for those concessions existed in the lease contracts, under a relief provided by the FASB. Under the relief, the concessions will not be treated as lease modifications that are accounted for over the remaining term of the respective leases, as the Company believes this would not accurately reflect the temporary economic effect of the concessions. Instead, (i) rent deferrals that meet the criteria will be treated as if no changes were made to the lease contract, with continued recognition of lease income and receivable under the original terms of the contract; and (ii) rent forgiveness that meets the criteria will be accounted for as variable lease payments in the affected periods.

The Company has agreed to provide the affected tenants primarily with a deferral of full or partial rent for two to three months, generally with deferred rent to be repaid in monthly installments over periods of three to 20 months. This resulted in an increase in receivables totaling $0.2 million as of December 31, 2020. All lease income receivable, including straight-

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line rents, are subject to the Company's policy for evaluation of collectability based upon creditworthiness of the lessee. In certain instances, the Company has also agreed to rent forgiveness, totaling approximately $0.7 million for 2020.

Future Fixed Lease Income

At December 31, 2020, future fixed lease payments receivable under noncancelable operating leases for real estate held for investment were as follows. These operating leases have expiration dates through 2039, taking into consideration renewal options exercisable at the lessee's election only when they are deemed reasonably certain, typically at the time the option is exercised.


Year Ending December 31,	(In thousands)
2021	$	805,863
2022	611,627
2023	517,852
2024	436,674
2025	397,486
2026 and thereafter	2,268,671
Total (1)	$	5,038,173

__________

(1) Excludes future fixed lease payments in connection with resident fee income as the related lease agreements are generally cancelable by residents with 30 days’ notice.

5. Loans Receivable

Effective January 1, 2020, the Company elected the fair value option for all of its outstanding loans receivable under a transitional relief upon adoption of ASC 326. The previous distinction of purchased credit-impaired ("PCI") loans and troubled debt restructurings ("TDR") are not applicable under fair value accounting. Refer to Note 12 for additional disclosures on loans receivable carried at fair value under the fair value option.

Loans receivable carried at fair value at December 31, 2020 are as follows:


	December 31, 2020
($ in thousands)	Unpaid Principal Balance		Fair Value		Weighted Average Coupon		Weighted Average Maturity in Years
Fixed rate
Mortgage loans	$	1,691,165	$	680,431	7.7	%	0.7
Mezzanine loans	595,890		329,922		10.9	%	1.1
Non-mortgage loans	129,738		111,737		13.2	%	4.2
	2,416,793		1,122,090
Variable rate
Mortgage loans	130,692		141,520		2.6	%	—
Mezzanine loans	31,395		31,727		8.5	%	4.9
	162,087		173,247
Loans receivable	$	2,578,880	$	1,295,337

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Loans receivable carried at amortized cost at December 31, 2019 were as follows:


	December 31, 2019
($ in thousands)	Unpaid Principal Balance		Amortized Cost		Weighted Average Coupon		Weighted Average Maturity in Years
Non-PCI Loans
Fixed rate
Mortgage loans	$	471,472	$	492,709	10.7	%	1.6
Mezzanine loans	495,182		494,238		12.6	%	0.6
Non-mortgage loans	149,380		148,623		12.9	%	5.4
	1,116,034		1,135,570
Variable rate
Mortgage loans	171,848		172,269		4.1	%	0.3
Mezzanine loans	44,887		44,637		12.7	%	1.6
	216,735		216,906
	1,332,769		1,352,476
PCI Loans
Mortgage loans	1,165,804		248,535
Allowance for loan losses			(48,187)
			1,552,824
Interest receivable			13,504
Loans receivable	$	2,498,573	$	1,566,328

Past Due and Nonaccrual Loans

Loans that are 90 days or more past due as to principal or interest, or where reasonable doubt exists as to timely collection, are generally considered nonperforming and placed on nonaccrual status.

The following table presents the fair value and unpaid principal balance by aging of loans held for investment at December 31, 2020 for which the fair value option was elected. A large majority of mortgage loans is composed of distressed loan portfolios that had been previously acquired by the Company at a discount (classified as PCI loans prior to the election of fair value option).


	December 31, 2020
(In thousands)	Fair Value		Unpaid Principal Balance		Fair Value less Unpaid Principal Balance
Loans receivable—fair value option
Current or less than 30 days past due	$	422,132	$	419,342	$	2,790
30-59 days past due	—		—		—
60-89 days past due	—		—		—
90 days or more past due or nonaccrual	873,205		2,159,538		(1,286,333)
	$	1,295,337	$	2,578,880	$	(1,283,543)

The following table provides an aging summary of non-PCI loans at carrying values before allowance for loan losses and interest receivable at December 31, 2019:


(In thousands)	December 31, 2019
Non-PCI loans at carrying values before allowance for loan losses
Current or less than 30 days past due	$	1,042,260
30-59 days past due	—
60-89 days past due	—
90 days or more past due or nonaccrual	310,216
	$	1,352,476

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For the Years Ended December 31, 2019 and 2018 and as of December 31, 2019

Troubled Debt Restructuring

During the years ended December 31, 2019 and 2018, there were no loans modified in a troubled debt restructuring ("TDR"), in which the Company provided borrowers, who are experiencing financial difficulties, with concessions in interest rates, payment terms or default waivers.

At December 31, 2019, the Company had one existing TDR loan that was in maturity default with a zero carrying value after a full allowance for loan loss of $37.8 million. The Company had no additional lending commitment on the TDR loan.

Non-PCI Impaired Loans

Non-PCI loans, excluding loans carried at fair value, are identified as impaired when it is no longer probable that interest or principal will be collected according to the contractual terms of the original loan agreement. Non-PCI impaired loans include predominantly loans under nonaccrual, performing and nonperforming TDRs, as well as loans in maturity default.

The following table summarizes the non-PCI impaired loans at December 31, 2019:


			Gross Carrying Value before Interest Receivable
(In thousands)	Unpaid Principal Balance		With Allowance for Loan Losses		Without Allowance for Loan Losses		Total		Allowance for Loan Losses
December 31, 2019	$	326,151	$	71,754	$	259,011	$	330,765	$	48,146

The average carrying value and interest income recognized on non-PCI impaired loans for 2019 and 2018 were as follows.


	Year Ended December 31,
(In thousands)	2019		2018
Average carrying value before allowance for loan losses and interest receivable	$	305,293	$	282,325
Total interest income recognized during the period impaired	7,514		7,127
Cash basis interest income recognized	447		1,190

Purchased Credit-Impaired Loans

There were no additional PCI loans acquired in 2019 and 2018.

Changes in accretable yield of PCI loans for 2019 and 2018 were as follows:


	Year Ended December 31,
(In thousands)	2019		2018
Beginning accretable yield	$	9,620	$	42,435
Dispositions	—		(5,484)
Changes in accretable yield	43,246		1,882
Accretion recognized in earnings	(19,637)		(27,911)
Deconsolidation	—		(991)
Effect of changes in foreign exchange rates	332		(311)
Ending accretable yield	$	33,561	$	9,620

At December 31, 2019, there were no PCI loans on the cash basis or cost recovery method for recognition of interest income.

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Allowance for Loan Losses

Allowance for loan losses and related carrying values before interest receivable of loans held for investment at December 31, 2019 were as follows:


	December 31, 2019
(In thousands)	Allowance for Loan Losses		Carrying Value
Non-PCI loans	$	48,146	$	71,754
PCI loans	41		17,935
	$	48,187	$	89,689

Changes in allowance for loan losses for 2019 and 2018 are presented below.


	Year Ended December 31,
(In thousands)	2019		2018
Allowance for loan losses at January 1	$	32,940	$	52,709
Contribution to CLNC	—		(518)
Deconsolidation	—		(5,983)
Provision for loan losses, net	35,880		43,034
Charge-off	(20,633)		(56,302)
Allowance for loan losses at December 31	$	48,187	$	32,940

Provision for loan losses by loan type was as follows:


	Year Ended December 31,
(In thousands)	2019		2018
Non-PCI loans	$	30,035	$	22,557
PCI loans	5,845		20,477
Total provision for loan losses, net	$	35,880	$	43,034

Lending Commitments

The Company has lending commitments to borrowers pursuant to certain loan agreements in which the borrower may submit a request for funding contingent on achieving certain criteria, which must be approved by the Company as lender, such as leasing, performance of capital expenditures and construction in progress with an approved budget. At December 31, 2020, total unfunded lending commitments was $158.7 million, of which the Company's share was $34.9 million, net of amounts attributable to noncontrolling interests.

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6. Equity and Debt Investments

The Company's equity investments and debt securities are represented by the following:


(In thousands)	December 31, 2020		December 31, 2019
Equity Investments
Equity method investments
Investment ventures	$	1,237,371	$	1,845,129
Private funds	216,871		142,386
	1,454,242		1,987,515
Other equity investments
Marketable equity securities	218,485		138,586
Investment ventures	—		91,472
Private funds and non-traded REIT	36,176		38,641
Total equity investments	1,708,903		2,256,214

Debt Securities
N-Star CDO bonds, available for sale	28,576		54,859
CMBS of consolidated fund, at fair value	—		2,732
Total debt securities	28,576		57,591
Equity and debt investments	$	1,737,479	$	2,313,805

Equity Investments

The Company's equity investments represent noncontrolling equity interests in various entities, including investments for which the Company has elected the fair value option.

Equity Method Investments

The Company owns a significant interest in Colony Credit Real Estate, Inc. (NYSE: CLNC), a publicly-traded REIT that it manages. The Company accounts for its investment under the equity method as it exercises significant influence over operating and financial policies of CLNC through a combination of its ownership interest, its role as the external manager and board representation, but does not control CLNC. The Company also owns equity method investments that are structured as joint ventures with one or more private funds or other investment vehicles managed by the Company, or with third party joint venture partners. These investment ventures are generally capitalized through equity contributions from the members and/or leveraged through various financing arrangements. The Company elected the fair value option to account for its interests in certain investment ventures and limited partnership interests in third party private equity funds (Note 12).

The liabilities of the equity method investment entities may only be settled using the assets of these entities and there is no recourse to the general credit of either the Company or the other investors for the obligations of these investment entities. Neither the Company nor the other investors are required to provide financial or other support in excess of their capital commitments. The Company’s exposure to the investment entities is limited to its equity method investment balance.

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The Company’s investments accounted for under the equity method are summarized below:


($ in thousands)		Carrying Value at
Investments (1)	Description	December 31, 2020		December 31, 2019
Colony Credit Real Estate, Inc.(2)	Common equity in publicly traded commercial real estate credit REIT managed by the Company and membership units in its operating subsidiary (36.4% ownership)	$	385,193	$	725,443
RXR Realty, LLC	Common equity in investment venture with a real estate investor, developer and investment manager (sold in February 2020)	—		93,390
Preferred equity	Preferred equity investments with underlying real estate	68		138,428
ADC investments	Investments in acquisition, development and construction loans in which the Company participates in residual profits from the projects, and the risk and rewards of the arrangements are more similar to those associated with investments in joint ventures	491,009		543,296
Private funds	General partner and/or limited partner interests in private funds (excluding carried interest allocation)	214,399		115,055
Private funds—carried interest	Disproportionate allocation of returns to the Company as general partner or equivalent based on the extent to which cumulative performance of the fund exceeds minimum return hurdles	—		21,940
Other investment ventures	Interests in 10 investments at December 31, 2020	181,774		127,088
Fair value option	Interests in initial stage ventures, real estate development, hotel co-investments, and limited partnership interests in private equity funds	181,799		222,875
		$	1,454,242	$	1,987,515

__________

(1) Each equity method investment has been determined to be either a VIE for which the Company was not deemed to be the primary beneficiary or a voting interest entity in which the Company does not have the power to control through a majority of voting interest or through other arrangements.

(2) CLNC is governed by its board of directors. The Company's role as manager is under the supervision and direction of CLNC's board of directors, which includes representatives from the Company but the majority of whom are independent directors.

Significant Sales of Equity Method Investments

In February 2020, the Company sold its equity investment in RXR Realty, LLC for net proceeds after taxes of $179.1 million, recording a gain of $106.1 million, which is included in equity method earnings.

Impairment of Equity Method Investments

The Company evaluates its equity method investments for OTTI at each reporting period. In 2020, 2019 and 2018, equity method investments in aggregate were impaired $512.2 million, $258.0 million and $61.2 million, respectively, and written down to aggregate fair value of $1.0 billion, $745.3 million and $32.8 million, respectively, at the time of impairment. In 2020 and 2019, impairment was principally on the Company's investment in CLNC, as discussed below. Impairment totaling $203.2 million was also recorded in 2020 on ADC loans accounted for as equity method investments, based upon (i) reduced future cash flow streams expected from these investments, primarily taking into consideration a combination of lower land values, delayed leasing, and/or offer prices in the current market, generally discounted at rates between 10% to 20%; and (ii) estimated fair value of net assets acquired from a defaulted borrower. Remaining impairment charges were generally determined using recoverable values for investments resolved or sold, investment values based upon projected exit strategies, or revised values based upon discounted future cash flow stream from the investment.

CLNC

CLNC was formed on January 31, 2018 through a contribution of the CLNY Contributed Portfolio (as described below), represented by the Company's ownership interests ranging from 38% to 100% in certain investment entities ("CLNY Investment Entities"), and a concurrent all-stock merger with NorthStar Real Estate Income Trust, Inc. ("NorthStar I") and NorthStar Real Estate Income II, Inc. ("NorthStar II"), both publicly registered non-traded REITs sponsored and managed by a subsidiary of the Company (the "Combination"). The CLNY Contributed Portfolio comprised the Company's interests in certain commercial real estate loans, net lease properties and limited partnership interests in third party sponsored funds, which represented a select portfolio of U.S. investments within the Company’s other equity and debt portfolio in the Other segment that were transferable assets consistent with CLNC's strategy. Upon closing of the Combination, the Company's management contracts with NorthStar I and NorthStar II were terminated; concurrently, the Company entered into a new management agreement with CLNC.

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The Company's contribution of the CLNY Contributed Portfolio to CLNC, and the merger of CLNC with NorthStar I and NorthStar II, resulted in a deconsolidation of the CLNY Investment Entities. Upon closing of the Combination, the Company measured its interest in CLNC based upon its proportionate share of CLNC's estimated fair value at closing. The excess of fair value over carrying value of the Company's equity interest in the CLNY Investment Entities of $9.9 million was recognized in other gain on the consolidated statement of operations in 2018.

Other-Than-Temporary Impairment ("OTTI")—In the fourth quarter of 2020, the Company determined that CLNC's closing stock price of $7.50 per share at December 31, 2020 compared to the carrying value of its investment in CLNC of $8.04 per share does not represent further OTTI of its investment in CLNC. As of December 31, 2020, the Company has the intent and ability to hold its investment in CLNC to recovery.

In the second quarters of 2020 and 2019, the Company had determined that its investment in CLNC was other-than-temporarily impaired and recorded an impairment charge, included in equity method losses, of $274.7 million and $227.9 million, respectively. In each case, the OTTI charge was measured as the excess of carrying value over market value of its investment in CLNC based upon CLNC's closing stock price on the last trading day of the quarter of $7.02 per share on June 30, 2020 and $15.50 per share on June 28, 2019.

At June 30, 2020, the Company's investment in CLNC had a carrying value of $611.2 million prior to the OTTI charge, which was in excess of its market value of $336.5 million. In March and April 2020, there was a significant decrease in CLNC's stock price, which reflected the significant volatility in equity markets and the significant decline in equity prices, for mortgage REITs and across industries, due to the COVID-19 crisis. Along with other publicly traded mortgage REITs, CLNC had seen a rebound in its stock price in May and June 2020, but its stock continues to trade below pre-COVID-19 levels. As of June 30, 2020, there was not a large disparity between the Company's carrying value in CLNC and CLNC's internal estimated NAV. Nevertheless, with increasing uncertainty over the extent and duration of the COVID-19 crisis, and the timeline for a recovery in the U.S economy, the Company believes that it is unlikely that the CLNC stock will recover and trade closer to its NAV in the near term. Accordingly, the Company also believes that it would be unlikely that the shortfall in market value relative to carrying value of its investment in CLNC would recover in the near term. As a result, the Company recognized OTTI on its investment in CLNC.

Basis Difference—The impairment charges resulted in a basis difference between the Company's carrying value of its investment in CLNC and the Company's proportionate share of CLNC's book value of equity. The impairment charge was applied to the Company's investment in CLNC as a whole and was not determined based on an impairment assessment of individual assets held by CLNC. In order to address this basis difference, the impairment charges were generally allocated on a relative fair value basis across CLNC's various investments. Accordingly, for any future impairment charges taken by CLNC on these investments, the Company's share thereof will be applied to reduce the basis difference and will not be recorded as an equity method loss until such time the basis difference associated with the respective investments has been fully eliminated. For the years ended December 31, 2020 and 2019, the Company reduced its share of net loss from CLNC by $83.9 million and $141.1 million, respectively, representing the basis difference allocated to investments that were resolved or impaired by CLNC during these periods. The remaining basis difference at December 31, 2020 was $277.5 million.

Combined Financial Information of Equity Method Investees

The following tables present selected combined financial information of the Company's equity method investees. Amounts presented represent combined totals at the investee level and not the Company's proportionate share.

Selected Combined Balance Sheet Information


(In thousands)	December 31, 2020		December 31, 2019
Total assets	$	14,488,278	$	14,026,862
Total liabilities	6,692,652		9,354,120
Owners' equity	7,466,679		4,509,879
Noncontrolling interests	328,947		162,863

Selected Combined Statements of Operations Information


	Year Ended December 31,
(In thousands)	2020		2019		2018
Total revenues	$	728,649	$	1,455,631	$	1,486,511

Net income (loss)	(184,588)		(827,550)		220,191
Net income (loss) attributable to noncontrolling interests	(32,648)		(50,350)		23,878
Net income (loss) attributable to owners	(151,940)		(777,200)		196,313

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Other Equity Investments

Other equity investments consist of the following:

Marketable Equity Securities—These are primarily equity investment in a third party managed mutual fund and publicly traded equity securities held by a consolidated private open-end fund. The equity securities of the consolidated fund comprise listed stocks primarily in the U.S. and to a lesser extent, in Europe, and predominantly in the digital real estate and telecommunication sectors.

Investment Ventures—In April 2020, the Company recapitalized its co-investment venture, which holds common equity in the Albertsons supermarket chain, and reduced its interest in the venture from 50% to 2%, generating total proceeds of $148.5 million and realizing a gain of $60.7 million to the venture, of which the Company's share is 50%. The interest recapitalized by the venture entitles the Company and its original co-investors to potential future profit allocation, which takes the form of an allocation of returns from the venture in excess of a minimum return threshold achieved by the new venture partner. The potential future profit allocation, of which the Company shares in 49%, is assigned a fair value each reporting period assuming a liquidation of the venture as of the reporting date. Such fair value may fluctuate over time based upon achievement of the minimum return threshold. Additionally, a portion of the venture's interest in Albertsons was monetized in conjunction with Albertsons' recapitalization and subsequent initial public offering in June 2020. The Company's remaining equity interest in the venture is valued based upon the publicly traded stock price of Albertsons Companies, Inc. ("ACI"), adjusted for liquidity restrictions attributable to lock-up provisions on the venture's holdings in ACI.

Private Funds and Non-Traded REIT—This represents interests in a Company-sponsored private fund and a non-traded REIT, NorthStar Healthcare Income, Inc. ("NorthStar Healthcare"), and limited partnership interest in a third party private fund sponsored by an equity method investee, for which the Company elected the NAV practical expedient (Note 12).

Investment Commitments

Investment Ventures—Pursuant to the operating agreements of certain unconsolidated ventures, the venture partners may be required to fund additional amounts for future investments, unfunded lending commitments, ordinary operating costs, guaranties or commitments of the venture entities. The Company also has lending commitments under ADC arrangements which are accounted for as equity method investments. At December 31, 2020, the Company’s share of these commitments was $11.6 million.

Private Funds—At December 31, 2020, the Company has unfunded commitments of $192.2 million to Company sponsored and third party sponsored funds.

Debt Securities

The Company's investment in debt securities is composed of available-for-sale N-Star CDO bonds, which are investment-grade subordinate bonds retained by a subsidiary of the Company, NRF Holdco, LLC ("NRF Holdco"), from its sponsored collateralized debt obligations ("CDOs"), and CDO bonds originally issued by NRF Holdco that it subsequently repurchased at a discount. These CDOs are collateralized primarily by commercial real estate ("CRE") debt and CRE securities.

Commercial mortgage-backed securities (“CMBS”) held by a consolidated sponsored investment company which has been dissolved, were sold in the third quarter of 2020 and liquidating distributions made to its shareholders.

AFS Debt Securities

The following tables summarize the balance and activities of the N-Star CDO bonds.


	Amortized Cost Without Allowance for Credit Loss		Allowance for Credit Loss		Gross Cumulative Unrealized
(in thousands)					Gains		Losses		Fair Value
December 31, 2020	$	46,561	$	(24,688)	$	6,703	$	—	$	28,576
December 31, 2019	46,002		NA		8,857		—		54,859

There were no sales of N-Star CDO bonds during 2020 or 2019.

These CDOs have long-dated stated maturities through 2037 and 2041, however, the Company expects the N-Star CDO bonds to have remaining future cash flows up to 3 years from December 31, 2020.

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Impairment of AFS Debt Securities

AFS debt securities are considered to be impaired if their fair value is less than their amortized cost basis.

2020 (subsequent to adoption of CECL)—The Company recorded allowance for credit loss in other loss of $24.7 million. The credit loss was determined based upon an analysis of the present value of contractual cash flows expected to be collected from the underlying collateral as compared to the amortized cost basis of the security. At December 31, 2020, there were no AFS debt securities in unrealized loss positions without allowance for credit loss.

2019—The Company recorded OTTI on AFS debt securities of $16.9 million in other loss. The losses were due to an adverse change in expected cash flows on N-Star CDO bonds. The Company believed that it was not likely that it would recover the full amortized cost on these securities, primarily based upon the performance and value of the underlying collateral. At December 31, 2019, there were no AFS debt securities with unrealized loss in AOCI.

7. Goodwill, Deferred Leasing Costs and Other Intangibles

Goodwill

The following table presents changes in the carrying value of goodwill.


	Year Ended December 31,
(In thousands)	2020		2019		2018
Beginning balance	$	1,452,891	$	1,514,561	$	1,514,561
Business combination (Note 3) (1)	(15,962)		726,330		—
Impairment	(594,000)		(788,000)		—
Ending balance	$	842,929	$	1,452,891	$	1,514,561

__________

(1) Includes the effects of measurement period adjustments within a one year period following the consummation of a business combination.

In the first quarter of 2020, $51.0 million of goodwill was reassigned from the Other segment to the Digital Investment Management segment to reflect the value of expected future investment management economics associated with certain existing investment vehicles that were repurposed to execute an investment strategy focused on the digital sector, as well as a team of professionals dedicated to the strategy. The amount that was reassigned to the digital segment was determined based upon the fair value of this digital strategy platform relative to the overall fair value of the other investment management reporting unit prior to the reassignment.

Goodwill balance by reportable segment is as follows.


(In thousands)	December 31, 2020		December 31, 2019
Balance by reportable segment:
Digital Operating	$	463,120	$	479,082
Digital Investment Management (1)	298,248		247,248
Other	81,561		726,561
	$	842,929	$	1,452,891

__________

(1) Goodwill of $140.5 million related to the DBH acquisition is deductible for income tax purposes.

Impairment of Goodwill

Digital Segments

The Company believes that the current shift and increased reliance on a digital economy positions the Company's digital business for further growth. Therefore, the Company determined that there were no indicators of impairment on goodwill in the digital reportable segments.

Other Segment

2020—In connection with the review and preparation of the financial statements, the Company determined that the deterioration in economic conditions as a result of COVID-19 and the Company's acceleration of its digital transformation in the second quarter of 2020 represent indicators of impairment to the goodwill in its other investment management business. Accordingly, the Company updated its quantitative test of the other investment management goodwill, which indicated that the carrying value of the other investment management reporting unit including goodwill at March 31, 2020

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and at June 30, 2020 exceeded its estimated fair value at the respective balance sheet date. As a result, the Company recognized impairment loss on its other investment management goodwill of $79.0 million and $515.0 million in the first and second quarters of 2020, respectively.

Valuation of the other investment management reporting unit contemplated a transition from certain of the Company's non-digital management business to a digitally-focused investment management business beginning in the fourth quarter of 2019. As discussed in Note 1, the Company determined in the second quarter of 2020 that it would accelerate the transition and focus on growing its digital investment management business. Consequently, as of June 30, 2020, the Company did not ascribe any value to future capital raising potential of the other investment management reporting unit, which represents the credit and opportunity fund management business, as it is no longer part of the Company's long-term strategy. Regarding the CLNC management contract, the COVID-19 crisis has caused the Company to postpone its plan to sell the contract. The contract is valued based upon its contractual termination value, which the Company believes approximates fair value.

As previously discussed, the acceleration of a digital strategy, combined with the negative economic effects of COVID-19 on property operations and market values in 2020, resulted in significant reduction in value of the Company's non-digital balance sheet. Such reduction in turn translated into a significant decrease in value of the other investment management reporting unit. The Company had previously considered the hypothetical value of its non-digital investment management business in a spinoff that would result in the Company becoming externally managed, and assigned a value to internally managing the Company's non-digital balance sheet assets. Under current circumstances, the Company determined that the hypothetical contract would have inconsequential, if any, remaining value to a market participant, and wrote off the value of internally managing its non-digital balance sheet.

The Company determined that there were no indicators of additional impairment in the third and fourth quarters of 2020. The remaining balance of the other investment management goodwill in the Other segment of $81.6 million at December 31, 2020 is expected to be fully written off in the near future when a runoff of the credit management business is substantially completed.

2019—In the third and fourth quarters of 2019, the Company recognized impairment losses to its other investment management goodwill of $387.0 million and $401.0 million, respectively, reflecting:

•loss of future fee income from sale of the industrial business, and reduction in CLNC's fee base to reflect its reduced book value in the third quarter of 2019; and

•beginning of the Company's transition to a digital focused investment management business in the fourth quarter of 2019.

2018—The Company performed a quantitative assessment in its annual impairment test and determined that its goodwill in the other investment management business was not impaired in 2018.

Deferred Leasing Costs, Other Intangible Assets and Intangible Liabilities

Deferred leasing costs and identifiable intangible assets and liabilities, excluding those related to assets held for disposition, are as follows.


	December 31, 2020						December 31, 2019
(In thousands)	Carrying Amount (Net of Impairment)(1)		Accumulated Amortization (1)		Net Carrying Amount (1)		Carrying Amount (Net of Impairment)(1)		Accumulated Amortization (1)		Net Carrying Amount (1)
Deferred Leasing Costs and Intangible Assets
Deferred leasing costs and lease related intangible assets (2)	$	1,331,177	$	(223,558)	$	1,107,619	$	424,987	$	(123,649)	$	301,338
Investment management intangibles (3)	277,761		(131,206)		146,555		285,233		(96,466)		188,767
Customer relationships and service contracts (4)	188,489		(6,664)		181,825		71,900		(289)		71,611
Trade names (5)	41,900		(4,713)		37,187		39,600		(185)		39,415
Other (6)	59,068		(7,286)		51,782		31,385		(359)		31,026
Total deferred leasing costs and intangible assets	$	1,898,395	$	(373,427)	$	1,524,968	$	853,105	$	(220,948)	$	632,157
Intangible Liabilities
Lease intangible liabilities (2)	$	155,010	$	(60,814)	$	94,196	$	174,208	$	(62,724)	$	111,484

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__________

(1) For intangible assets and intangible liabilities recognized in connection with business combinations, purchase price allocations may be subject to adjustments during the measurement period, not to exceed 12 months from date of acquisition, based upon new information obtained about facts and circumstances that existed at time of acquisition (Note 3). Amounts are presented net of impairments and write-offs.

(2) Lease intangible assets are composed of in-place leases, above-market leases, lease incentives and tenant relationships. Lease intangible liabilities are composed of below-market leases.

(3) Composed of investment management contracts and investor relationships.

(4) In connection with colocation data center business.

(5) Finite-lived trade names are amortized over estimated useful lives of 1 to 10 years, while indefinite life trade name is not subject to amortization.

(6) Represents primarily assembled workforce acquired in an asset acquisition, hotel franchise agreements which are amortized over the term of the respective contracts or agreements, and certificates of need associated with certain wellness infrastructure portfolios which are not amortized.

Impairment of Identifiable Intangible Assets

Management contract intangible assets were impaired $8.2 million in 2020, $8.6 million in 2019 and $7.0 million in 2018, and written down to aggregate fair value of $12.4 million, $16.9 million and $36.4 million at the time of impairment, respectively. Fair value was generally based upon revised future net cash flows to be generated over the remaining life of the respective management contracts, discounted at 10%, and represent Level 3 fair value.

Additionally, certain intangible assets were written-off in prior years, primarily the management contracts of NorthStar I and NorthStar II, publicly registered non-traded REITs sponsored by the Company, totaling $139.0 million, upon their termination in connection with the Combination, NorthStar trade name of $59.5 million, and retail investor relationship of $10.1 million, in 2018.

Real estate intangibles are subject to impairment as part of the real estate asset group, as discussed in Note 4.

Amortization of Intangible Assets and Liabilities

The following table summarizes amortization of deferred leasing costs and finite-lived intangible assets and intangible liabilities, excluding amounts related to discontinued operations (Note 16):


	Year Ended December 31,
(In thousands)		2020		2019		2018



Net increase to rental income (1)		$	6,140	$	14,442	$	2,717



Net increase (decrease) to ground rent expense (2)		$	—	$	—	$	(260)

Amortization expense
Deferred leasing costs and lease related intangibles		$	97,107	$	33,910	$	31,454
Investment management intangibles		33,431		89,236		26,992
Customer relationships and service contracts		7,775		289		—
Trade name		4,529		186		1,606
Other		6,816		182		69
		$	149,658	$	123,803	$	60,121

__________

(1) Represents the effect of amortizing above- and below-market leases and lease incentives.

(1) Represents the effect of amortizing above- and below-market ground leases prior to adoption of new lease standard on January 1, 2019.

The following table presents the future amortization of deferred leasing costs and finite-lived intangible assets and intangible liabilities, excluding those related to assets and liabilities held for disposition.


	Year Ending December 31,
(In thousands)	2021		2022		2023		2024		2025		2026 and Thereafter		Total



Net increase (decrease) to rental income	$	(756)	$	(354)	$	1,343	$	629	$	(592)	$	(15,506)	$	(15,236)











Amortization expense	251,687		167,384		146,085		117,249		105,028		593,229		1,380,662

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8. Assets and Related Liabilities Held for Disposition

Total assets and related liabilities held for disposition are summarized below.

Assets and liabilities held for non-sale disposition in all periods presented represent a portfolio of 48 hotels in the Hospitality segment that has been placed in receivership following the lender's acceleration of the underlying debt that was defaulted in April 2020. Control over the operations and any eventual sale of these hotels has been transferred to the receivers, who are acting for the benefit of the lender. The Company has not been released from its debt obligations, however, the debt is non-recourse to the Company.


	December 31, 2020						December 31, 2019
(In thousands)	Disposition by Sale		Non-Sale Disposition		Total Held for Disposition		Disposition by Sale		Non-Sale Disposition		Total Held for Disposition
Assets
Restricted cash	$	82,850	$	14,695	$	97,545	$	122,663	$	5,782	$	128,445
Real estate, net	3,159,742		743,227		3,902,969		4,421,888		1,019,849		5,441,737

Deferred leasing costs and intangible assets, net	9,748		437		10,185		37,399		2,533		39,932
Other assets (1)	79,936		15,166		95,102		97,219		35,752		132,971
Total assets held for disposition	$	3,332,276	$	773,525	$	4,105,801	$	4,679,169	$	1,063,916	$	5,743,085

Liabilities
Debt, net (2)	$	2,714,079	$	780,000	$	3,494,079	$	2,926,449	$	772,485	$	3,698,934
Lease intangibles and other liabilities	155,949		47,513		203,462		141,426		22,161		163,587
Total liabilities related to assets held for disposition	$	2,870,028	$	827,513	$	3,697,541	$	3,067,875	$	794,646	$	3,862,521

__________

(1) Includes corporate aircraft that was impaired $11.9 million in 2020 to reflect recoverable value prior to its sale to a third party in January 2021.

(2) Represents debt related to assets held for disposition if the debt is expected to be assumed by the acquirer upon sale or the debt is expected to be extinguished through lender's assumption of underlying collateral.

Discontinued Operations

The table below presents assets and liabilities held for sale and for non-sale disposition that are related to discontinued operations (Note 16). The Company sold its interest in the bulk industrial portfolio in December 2020 and the venture was deconsolidated.


	December 31, 2020		December 31, 2019
(In thousands)	Hotel			Hotel		Industrial
Assets
Restricted cash	$	92,870		$	112,923	$	—
Real estate, net	3,504,249			4,658,477		342,758
Deferred leasing costs and intangible assets, net	1,851			6,802		25,371
Other assets	70,343			111,229		3,917
Total assets held for disposition—discontinued operations	$	3,669,313		$	4,889,431	$	372,046

Liabilities
Debt, net	$	3,494,079		$	3,465,990	$	232,944
Lease intangibles and other liabilities	164,339			128,155		2,090
Total liabilities related to assets held for disposition—discontinued operations	$	3,658,418		$	3,594,145	$	235,034

Non-Recourse Investment-Level Secured Debt

As of December 31, 2020, other than the $780.0 million of debt that has been accelerated by the lender, as discussed above, the Company has cured all remaining hotel debt that were in default during 2020 due to the fallout from COVID-19, and all such debt will be assumed by the buyer upon sale of the hotel assets. This includes debt on the THL Hotel Portfolio that was modified in a troubled debt restructure with no resulting gain from the restructuring.

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9. Restricted Cash, Other Assets and Other Liabilities

Restricted Cash

The following table summarizes the Company's restricted cash balance:


(In thousands)	December 31, 2020		December 31, 2019
Capital expenditures reserves (1)	$	13,516	$	18,314
Real estate escrow reserves (2)	13,608		15,455
Borrower escrow deposits	—		8,079
Lender restricted cash (3)	112,905		27,409
Other (4)	21,890		21,806
Total restricted cash	$	161,919	$	91,063

__________

(1) Represents primarily cash held by lenders for capital improvements, furniture, fixtures and equipment, tenant improvements, lease renewal and replacement reserves related to real estate assets.

(2) Represents primarily insurance, real estate tax, repair and maintenance, tenant security deposits and other escrows related to real estate assets.

(3) Represents cash from the Company's investment properties that are restricted by lenders in accordance with respective debt agreements.

(4) Includes investment sales proceeds held in escrow.

Other Assets

The following table summarizes the Company's other assets:


(In thousands)	December 31, 2020		December 31, 2019
Straight-line rents	$	60,100	$	37,230
Investment deposits and pending deal costs	41,213		32,994
Prefunded capital expenditures for Vantage SDC	48,881		—
Deferred financing costs, net (1)	1,222		2,794
Derivative assets (Note 11)	99		21,382
Prepaid taxes and deferred tax assets, net	76,103		69,328
Receivables from resolution of investments (2)	1,858		63,984
Operating lease right-of-use asset, net (3)	461,890		180,486
Finance lease right-of-use asset, net	143,182		—
Accounts receivable, net (4)	83,914		53,387
Prepaid expenses	30,949		22,417
Other assets	45,779		29,219
Fixed assets, net	21,929		44,768
Total other assets	$	1,017,119	$	557,989

__________

(1) Deferred financing costs relate to revolving credit arrangements.

(2) Represents proceeds from loan repayments and real estate sales held in escrow, and sales of equity investments pending settlement.

(3) Net of impairment of $9.4 million in 2020 and $0.6 million in 2019 for corporate office leases as the Company determined there is a reduced need for office space based upon the Company's current operations and has abandoned certain leased spaces.

(4) Includes primarily receivables from tenants, resident fees, and reimbursable capital expenditures, and is presented net of allowance for doubtful accounts, where applicable, of $0.9 million at December 31, 2020 and $0.1 million at December 31, 2019.

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Accrued and Other Liabilities

The following table summarizes the Company's accrued and other liabilities:


(In thousands)	December 31, 2020		December 31, 2019
Tenant security deposits and payable	$	11,938	$	12,457
Borrower escrow deposits	—		9,903
Deferred income (1)	37,454		30,040
Interest payable	36,483		28,902
Derivative liabilities (Note 11)	103,772		127,531

Current and deferred income tax liability	168,384		222,206
Operating lease liability	403,053		156,147
Finance lease liability	148,974		—
Accrued compensation	86,190		72,859
Accrued carried interest and incentive fee compensation	1,929		50,360
Accrued real estate and other taxes	22,735		22,091
Accounts payable and accrued expenses	177,847		91,614
Other liabilities	111,341		63,409
Accrued and other liabilities	$	1,310,100	$	887,519

__________

(1) Represents primarily prepaid rental income, prepaid interest from borrowers held in reserve accounts, and deferred management fees, largely from digital investment vehicles. Deferred management fees totaling $7.7 million at December 31, 2020 and $18.3 million at December 31, 2019 will be recognized as fee income over a weighted average period of 1.9 years and 1.2 years, respectively. Deferred management fees recognized as income of $13.8 million and $1.3 million in the years ended December 31, 2020 and 2019, respectively, pertain to the deferred management fee balance at the beginning of each respective period.

10. Debt

The Company's debt consists of the following components, excluding debt related to assets held for disposition that is expected to be assumed by the counterparty upon disposition, which is included in liabilities related to assets held for disposition (Note 8).


(In thousands)	Corporate Credit Facility(1)		Convertible and Exchangeable Senior Notes		Secured Debt (2)		Junior Subordinated Notes		Total Debt
December 31, 2020
Debt at amortized cost
Principal	$	—	$	545,107	$	7,106,234	$	280,117	$	7,931,458
Premium (discount), net	—		(6,540)		23,334		(76,269)		(59,475)
Deferred financing costs	—		(2,670)		(79,575)		—		(82,245)
	$	—	$	535,897	$	7,049,993	$	203,848	$	7,789,738
December 31, 2019
Debt at amortized cost
Principal	$	—	$	616,105	$	4,766,594	$	280,117	$	5,662,816
Premium (discount), net	—		2,243		(12,598)		(78,927)		(89,282)
Deferred financing costs	—		(4,296)		(51,320)		—		(55,616)
	$	—	$	614,052	$	4,702,676	$	201,190	$	5,517,918

__________

(1) Deferred financing costs related to the corporate credit facility are included in other assets.

(2) Debt principal totaling $270.0 million at December 31, 2020 and $265.6 million at December 31, 2019 relates to financing of assets held for disposition, and is expected to be repaid upon disposition of the respective underlying assets. Debt associated with assets held for disposition that is expected to be assumed by the counterparty upon disposition is included in liabilities related to assets held for disposition (Note 8).

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The following table summarizes certain information about debt carried at amortized cost.


	Fixed Rate					Variable Rate					Total
($ in thousands)	Outstanding Principal		Weighted Average Interest Rate (Per Annum)(4)		Weighted Average Years Remaining to Maturity(5)	Outstanding Principal		Weighted Average Interest Rate (Per Annum)(4)		Weighted Average Years Remaining to Maturity(5)	Outstanding Principal		Weighted Average Interest Rate (Per Annum)(4)		Weighted Average Years Remaining to Maturity(5)
December 31, 2020
Recourse
Corporate credit facility	$	—	N/A		N/A	$	—	—	%	1.0	$	—	—	%	1.0
Convertible and exchangeable senior notes(1)	545,107		5.36	%	3.6	—		N/A		N/A	545,107		5.36	%	3.6
Junior subordinated debt (2)	—		N/A		N/A	280,117		3.10	%	15.4	280,117		3.10	%	15.4
Secured debt (3)	32,815		5.02	%	—	—		N/A		N/A	32,815		5.02	%	—
	577,922					280,117					858,039
Non-recourse (6)
Secured debt
Digital Operating	2,132,852		2.54	%	4.8	1,093,991		5.92	%	4.4	3,226,843		3.69	%	4.7
Wellness Infrastructure (7)	401,767		4.55	%	4.1	2,331,366		3.95	%	3.3	2,733,133		4.04	%	3.4

Other—Other Equity and Debt	289,354		6.14	%	0.8	824,089		3.31	%	2.3	1,113,443		4.04	%	1.9
	2,823,973					4,249,446					7,073,419
	$	3,401,895				$	4,529,563				$	7,931,458

December 31, 2019
Recourse
Corporate credit facility	$	—	N/A		N/A	$	—	—		2.0	$	—	—		2.0
Convertible and exchangeable senior notes(1)	616,105		4.27	%	2.0	—		N/A		N/A	616,105		4.27	%	2.0
Junior subordinated debt (2)	—		N/A		N/A	280,117		4.77	%	16.4	280,117		4.77	%	16.4
Secured debt (3)	35,072		5.02	%	5.9	—		N/A		N/A	35,072		5.02	%	5.9
	651,177					280,117					931,294
Non-recourse (6)
Secured debt
Digital Operating	—		N/A		N/A	539,155		6.98	%	4.8	539,155		6.98	%	4.8
Wellness Infrastructure (7)	405,980		4.55	%	5.1	2,547,726		5.22	%	4.3	2,953,706		5.13	%	4.4
Other—Other Equity and Debt	151,777		4.26	%	3.4	1,086,884		3.24	%	2.6	1,238,661		3.37	%	2.7
	557,757					4,173,765					4,731,522
	$	1,208,934				$	4,453,882				$	5,662,816

__________

(1) Includes the 5.375% exchangeable senior notes which is an obligation of NRF Holdco as the issuer, as described further below.

(2) Represents an obligation of NRF Holdco as the junior subordinated debt was issued by certain of its subsidiaries, as described further below. Accordingly, Colony Capital, Inc. and its operating company, Colony Capital Operating Company, LLC, are not guarantors to the debt.

(3) The fixed rate recourse debt is secured by the Company's aircraft and was repaid in January 2021 upon sale of the aircraft.

(4) Calculated based upon outstanding debt principal at balance sheet date and for variable rate debt, the applicable index plus spread at balance sheet date.

(5) Calculated based upon initial maturity dates, or extended maturity dates if extension criteria are met and extension is available at the Company's option.

(6) Investment-level secured debt that is non-recourse to the Company in the Other Equity and Debt portfolio and in the Wellness Infrastructure segment totaling $212.9 million as of the date of this filing was in default ($235.6 million at December 31, 2019). In the Other Equity and Debt portfolio, defaulted debt of $102.6 million has been accelerated by the lenders, and the remainder represents primarily debt assumed by the Company when it acquired the equity interests and obtained control over defaulted borrowers.

(7) Previously referred to as Healthcare.

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Conveyance to Lender

In August 2020, the Company indirectly conveyed the equity of certain of its wellness infrastructure borrower subsidiaries, comprising 36 properties in its senior housing operating portfolio with a carrying value of $161.6 million and $157.5 million of outstanding principal ($156.7 million carrying value) of previously defaulted debt, to an affiliate of the lender, which released the Company from all rights and obligations with respect to those assets and corresponding debt. The conveyance of equity in full satisfaction of the outstanding debt was deemed to be a troubled debt restructuring that resulted in an immaterial gain.

Corporate Credit Facility

On June 29, 2020, the OP entered into the Fourth Amendment (the “Amendment”) to the Second Amended and Restated Credit Agreement, dated as of January 10, 2017 (as amended, supplemented or otherwise modified from time to time prior to the date hereof, the “Credit Agreement”), with JPMorgan Chase Bank, N.A., as administrative agent, and the several lenders from time to time party thereto.

The Amendment modified the aggregate amount of revolving commitments available under the Credit Agreement to $500 million ($750 million prior to the Amendment), which was reduced to $450 million upon exercise of the first extension option in December 2020. In accordance with the terms of the Credit Agreement, the available revolving commitment amounts will be reduced to $400 million on March 31, 2021. The credit facility is scheduled to mature in July 2021, with one remaining 6-month extension option (representing no change to the overall term after the Amendment), subject to a fee of 0.10% of the commitment amount upon exercise.

Pursuant to the Amendment, advances under the Credit Agreement accrue interest at a per annum rate equal to, at the Company’s election, either LIBOR plus a margin of 2.50% (previously 2.25%), or a base rate determined according to a prime rate or federal funds rate plus a margin of 1.50% (previously 1.25%). On January 11, 2021, as a result of exercising the first extension option in December 2020, the margin increased to 2.75% for LIBOR borrowings and 1.75% for prime rate or federal funds rate borrowings. Unused amounts under the credit facility accrue a per annum commitment fee of 0.35%.

The maximum amount available to be drawn at any time under the credit facility is limited by a borrowing base of certain investment assets, with the valuation of such investment assets generally determined according to a percentage of adjusted net book value or a multiple of base management fee EBITDA (as defined in the Credit Agreement). As of the date of this filing, the full $450 million is available to be drawn under the facility.

The Amendment provided for modifications to the financial covenants and the borrowing base including, among other things: exclusion of certain non-recourse debt and related assets in the calculation of certain financial ratios (such assets, the “Specified Excluded Assets”), exclusion of EBITDA and fixed charges of Specified Excluded Assets in the calculation of the OP’s fixed charge coverage ratio, which must exceed 1.35 to 1.0, reduction of the minimum tangible net worth covenant from $4.55 billion to $1.74 billion, which must exclude the net worth of Specified Excluded Assets, and modification to the borrowing base to increase capacity for digital investment management and include digital infrastructure investments. As of December 31, 2020 and through the date of this filing, the Company was in compliance with all of the financial covenants.

The Credit Agreement also contains various additional affirmative and negative covenants, including financial covenants that require the Company to maintain minimum tangible net worth, liquidity levels and financial ratios, as defined in the Credit Agreement. In December 2020, we amended the Credit Agreement primarily to provide us with flexibility to determine not to maintain REIT status, without requiring lender approval.

Further, as a result of modifications to the permitted investments and restricted payment provisions in the Amendment, during the term of the Credit Agreement, the Company is prohibited from, among other things, (i) making any investments other than (A) investments in digital infrastructure assets and (B) pre-existing obligations and protective investments in existing assets to preserve, administer or otherwise realize on such investment, (ii) repurchasing capital stock of the Company and (iii) paying dividends, other than for (A) paying dividends to maintain the Company’s status as a REIT, (B) reducing the payment of income taxes and (C) paying dividends on the Company’s preferred equity.

Certain of the Company’s subsidiaries guarantee the obligations of the Company under the Credit Agreement. As security for the advances under the Credit Agreement, the Company and some of its affiliates pledged their equity interests in certain subsidiaries through which the Company directly or indirectly owns substantially all of its assets.

The Credit Agreement also includes customary events of default, in certain cases subject to reasonable and customary periods to cure. The occurrence of an event of default may result in the termination of the credit facility, accelerate the Company’s repayment obligations, in certain cases limit the Company’s ability to make distributions, and

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allow the lenders to exercise all rights and remedies available to them with respect to the collateral. There have been no events of default since the inception of the credit facility.

Convertible and Exchangeable Senior Notes

Convertible and exchangeable senior notes (collectively, the senior notes) outstanding as of December 31, 2020 are as follows, each representing senior unsecured obligations of Colony Capital, Inc. or a subsidiary as the respective issuers of the senior notes:


Description	Issuance Date	Due Date	Interest Rate (per annum)		Conversion or Exchange Price (per share of common stock)		Conversion or Exchange Ratio (in shares)(1)	Conversion or Exchange Shares (in thousands)	Earliest Redemption Date	Outstanding Principal
										December 31, 2020		December 31, 2019

Issued by Colony Capital, Inc.
5.00% Convertible Senior Notes	April 2013	April 15, 2023	5.00	%	$	15.76	63.4700	12,694	April 22, 2020	$	200,000	$	200,000
3.875% Convertible Senior Notes	January and June 2014	January 15, 2021	3.875	%	16.57		60.3431	1,901	January 22, 2019	31,502		402,500
Issued by Colony Capital Operating Company, LLC
5.75% Exchangeable Senior Notes	July 2020	July 15, 2025	5.750	%	2.30		434.7826	130,435	July 21, 2023	300,000		—
Issued by NRF Holdco, LLC
5.375% Exchangeable Senior Notes	June 2013	June 15, 2033	5.375	%	12.04		83.0837	1,130	June 15, 2023	13,605		13,605
										$	545,107	$	616,105

__________

(1) The conversion or exchange rate for the senior notes is subject to periodic adjustments to reflect certain carried-forward adjustments relating to common stock splits, reverse stock splits, common stock adjustments in connection with spin-offs and cumulative cash dividends paid on the Company's common stock since the issuances of the respective senior notes. The conversion or exchange ratios are presented in shares of common stock per $1,000 principal of each senior note.

The senior notes mature on their respective due dates, unless earlier redeemed, repurchased, converted or exchanged, as applicable. The outstanding senior notes are convertible or exchangeable at any time by holders of such notes into shares of the Company’s common stock at the applicable conversion or exchange rate, which is subject to adjustment upon occurrence of certain events. In the case of the 5.375% exchangeable senior notes, NRF Holdco may elect to settle a holder’s exchange into cash, the Company’s common stock or a combination thereof.

To the extent certain trading conditions of the Company’s common stock are met, the senior notes are redeemable by the applicable issuer thereof in whole or in part for cash at any time on or after their respective earliest redemption dates at a redemption price equal to 100% of the principal amount of such senior notes being redeemed, plus accrued and unpaid interest (if any) up to, but excluding, the redemption date. In addition, prior to June 15, 2023 and subject to certain trading conditions of the Company’s common stock, NRF Holdco may redeem its 5.375% exchangeable senior notes at a make-whole redemption price.

In the event of certain change in control transactions and, for the 5.375% exchangeable senior notes only, on each of June 15, 2023 and June 15, 2028, holders of the senior notes have the right to require the applicable issuer to purchase all or part of such holder's senior notes for cash in accordance with terms of the governing documents of the respective senior notes.

Issuance of Exchangeable Senior Notes

In July 2020, the OP issued $300.0 million of exchangeable senior notes maturing in July 2025, bearing interest at 5.75% per annum, and exchangeable into shares of the Company's class A common stock at an initial exchange rate equal to 434.7826 shares of common stock per $1,000 principal amount of notes, equivalent to an exchange price of approximately $2.30 per share. The initial exchange rate is subject to adjustment upon occurrence of certain events, but will not be adjusted for any accrued and unpaid interest. Net proceeds from this issuance, after deducting underwriting discounts, commissions and offering expenses, were $291.0 million.

Repurchase of Convertible Senior Notes

The Company repurchased $371.0 million of the outstanding principal of the 3.875% convertible senior notes in the third quarter of 2020 for total purchase price of $371.1 million, including accrued and unpaid interest, funded with net proceeds from issuance of the 5.75% exchangeable senior notes in July 2020 and cash on hand through a tender offer of

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the 3.875% convertible senior notes completed in September 2020. The remaining $31.5 million of outstanding principal on the 3.875% convertible senior notes was repaid upon maturity in January 2021.

Secured Debt

These are primarily investment level financing, which are non-recourse to the Company, and secured by underlying commercial real estate and mortgage loans receivable.

In October 2020 and February 2021, Vantage SDC and DataBank, the Company's subsidiaries in the Digital Operating segment, raised $1.3 billion and $657.9 million of securitized notes at blended fixed rates of 1.8% and 2.3%, with 6 years and 5 years maturity, respectively. In both instances, the proceeds were applied principally to refinance outstanding debt, which meaningfully reduced the overall cost of debt and extended debt maturities at Vantage SDC and DataBank.

Junior Subordinated Debt

Trust preferred securities ("TruPS") were previously issued in private placement offerings by subsidiaries of NRF Holdco, LLC (the "Issuer," a subsidiary of Colony Capital, Inc.), which were formed as statutory trusts, NorthStar Realty Finance Trust I through VIII (the “Trusts”). The sole assets of the Trusts consist of a like amount of junior subordinated notes issued by the Issuer at the time of the offerings (the "Junior Notes"). As Colony Capital, Inc. and its operating company, Colony Capital Operating Company, LLC, are not issuers of the junior subordinated debt, neither are obligors nor guarantors on the junior subordinated debt and TruPS.

The Issuer may redeem the Junior Notes at par, in whole or in part, for cash, after five years. To the extent the Issuer redeems the Junior Notes, the Trusts are required to redeem a corresponding amount of TruPS. The ability of the Trusts to pay dividends depends on the receipt of interest payments on the Junior Notes. The Issuer has the right, pursuant to certain qualifications and covenants, to defer payments of interest on the Junior Notes issued to NorthStar Realty Finance Trust I through III for up to six consecutive quarters. If payment of interest on the Junior Notes is deferred, the Trusts will defer the quarterly distributions on the TruPS for a corresponding period. Additional interest accrues on deferred payments at the annual rate payable on the Junior Notes, compounded quarterly.

Future Minimum Principal Payments

The following table summarizes future scheduled minimum principal payments of debt at December 31, 2020, excluding hotel secured debt of $3.5 billion that is classified as held for disposition (Note 8). Future debt principal payments are presented based on initial maturity dates or extended maturity dates if extension criteria are met at December 31, 2020 and the extension option is at the Company's discretion. Financing on certain loan portfolios are based on the Company's expectation of cash flows from underlying loan collateral as principal repayments on the loan financing depend upon net cash flows from collateral assets and ratio of outstanding principal to collateral.


	Year Ending December 31,
(In thousands)	2021		2022		2023		2024		2025		2026 and thereafter		Total
Corporate credit facility	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Convertible and exchangeable senior notes	31,502		—		200,000		—		300,000		13,605		545,107
Junior subordinated debt	—		—		—		—		—		280,117		280,117
Secured debt—recourse	32,815		—		—		—		—		—		32,815
Secured debt—non-recourse:
Digital Operating	9,576		10,126		261,285		971,606		1,274,250		700,000		3,226,843
Wellness Infrastructure	159,179		320,164		10,859		2,113,612		1,020		128,299		2,733,133
Other—Other Equity and Debt	472,332		111,559		67,154		394,426		67,061		911		1,113,443
Total	$	705,404	$	441,849	$	539,298	$	3,479,644	$	1,642,331	$	1,122,932	$	7,931,458

11. Derivatives

The Company uses derivative instruments to manage the risk of changes in interest rates and foreign exchange rates, arising from both its business operations and economic conditions. Specifically, the Company enters into derivative instruments to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and cash payments, the values of which are driven by interest rates, principally relating to the Company’s investments and

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borrowings. Additionally, the Company’s foreign operations expose the Company to fluctuations in foreign interest rates and exchange rates. The Company enters into derivative instruments to protect the value or fix certain of these foreign denominated amounts in terms of its functional currency, the U.S. dollar. Derivative instruments used in the Company’s risk management activities may be designated as qualifying hedge accounting relationships (“designated hedges”) or otherwise used for economic hedging purposes (“non-designated hedges”).

Fair value of derivative assets and derivative liabilities are as follows:


	December 31, 2020						December 31, 2019
(In thousands)	Designated Hedges		Non-Designated Hedges		Total		Designated Hedges		Non-Designated Hedges		Total
Derivative Assets
Foreign exchange contracts	$	—	$	6	$	6	$	15,307	$	1,271	$	16,578
Interest rate contracts	29		64		93		78		237		315
Performance swaps	—		—		—		—		4,493		4,493
Included in other assets	$	29	$	70	$	99	$	15,385	$	6,001	$	21,386
Derivative Liabilities
Foreign exchange contracts	$	—	$	967	$	967	$	8,134	$	2,482	$	10,616
Performance swaps	—		149		149		—		—		—
Forward contracts	—		102,656		102,656		—		116,915		116,915
Included in accrued and other liabilities	$	—	$	103,772	$	103,772	$	8,134	$	119,397	$	127,531

Certain counterparties to the derivative instruments require the Company to deposit cash or other eligible collateral. The Company had cash collateral on deposit, included in other assets, of $15.9 million at December 31, 2020 and $10.0 million at December 31, 2019, all of which related to the forward contracts and performance swaps discussed below.

Foreign Exchange Contracts

The following table summarizes the aggregate notional amounts and certain key terms of non-designated foreign exchange contracts in place at December 31, 2020:

Hedged Currency

Instrument Type

Notional Amount
(in thousands)

FX Rates
($ per unit of foreign currency)

Range of Expiration Dates

EUR

Put options

€

224,000

$0.95

May 2021 to May 2022

GBP

Put options

32,000

$1.05

May 2021

GBP

FX Forward

23,510

$1.33

April 2021 to September 2021

The Company’s foreign denominated net investments in subsidiaries or joint ventures were €455.4 million and £286.3 million, or a total of $0.9 billion at December 31, 2020, and €517.9 million and £275.5 million, or a total of $0.9 billion at December 31, 2019.

The Company enters into foreign exchange contracts to hedge the foreign currency exposure of certain investments in foreign subsidiaries or equity method joint ventures, with notional amounts and termination dates based upon the anticipated return of capital from the investments. Prior to the second quarter of 2020, the Company utilized primarily (i) forward contracts whereby the Company agreed to sell an amount of foreign currency for an agreed upon amount of U.S. dollars and (ii) costless collars consisting of caps and floors, which consisted of a combination of currency options with single date expirations. Both types of hedging strategies were designated as net investment hedges.

During the second quarter of 2020, the Company unwound all of its existing foreign currency hedges and entered into foreign currency put options with upfront premiums whereby the Company gains protection against foreign currency weakening below a specified level. The put options are set to expire in increments according to the Company's expected monetization timeframe of the hedged investments, but the notional amounts are not identifiable to specific investments. Accordingly, the put options are not designated for hedge accounting purposes.

Designated Net Investment Hedges

Release of AOCI related to net investment hedges occurs upon losing a controlling financial interest in an investment or obtaining control over an equity method investment. Upon sale, complete or substantially complete liquidation of an investment in a foreign subsidiary, or partial sale of an equity method investment, the gain or loss on the related net investment hedge is reclassified from AOCI to other gain (loss) as summarized below.

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	Year Ended December 31,
(In thousands)		2020		2019		2018
Designated net investment hedges:
Realized gain transferred from AOCI to earnings		$	414	$	1,790	$	7,426

Non-Designated Hedges

At the end of each quarter, the Company reassesses the effectiveness of its net investment hedges and as appropriate, dedesignates the portion of the derivative notional amount that is in excess of the beginning balance of its net investments. Any unrealized gain or loss on the dedesignated portion of net investment hedges and on non-designated foreign exchange contracts are recorded in other gain (loss).


	Year Ended December 31,
(In thousands)		2020		2019		2018
Dedesignated net investment hedges:
Unrealized gain (loss) transferred from AOCI to earnings		$	1,485	$	(2,693)	$	3,726
Non-designated foreign exchange contracts:
Unrealized gain (loss) in earnings		(2,727)		—		—

Interest Rate Contracts

The Company uses various interest rate contracts, some of which may be designated as cash flows hedges, to limit its exposure to changes in interest rates on various floating rate debt obligations. The following table summarizes the interest rate contracts held by the Company at December 31, 2020.


	Notional Amount (in thousands)					Strike Rate / Forward Rate
Instrument Type	Designated		Non-Designated		Index		Range of Expiration Dates

Interest rate caps	$	—	$	3,340,895	1-Month LIBOR	2.00% - 4.00%	March 2021 to July 2022
Interest rate caps	€	220,590	€	451,410	3-Month EURIBOR	0.25% - 1.50%	January 2021 to June 2024
Interest rate caps	£	—	£	284,426	3-Month GBP LIBOR	1.00% - 2.00%	November 2021 to October 2022

The following table summarizes amounts recorded in the income statements related to interest rate contracts.


	Year Ended December 31,
(In thousands)		2020		2019		2018
Interest expense on designated interest rate contracts (1)		$	24	$	—	$	—
Realized and unrealized gain (loss) net:
Designated interest rate contracts		—		8,019		—
Non-designated interest rate contracts (2)		(209)		(242,898)		33,307

__________

(1) Represents amortization of the cost of designated interest rate caps to interest expense based upon expected hedged interest payments on variable rate debt.

(2) Amounts include unrealized loss of $239.3 million in 2019 and unrealized gain of $34.0 million on a $2.0 billion notional forward starting swap that was settled at the end of 2019.

Forward Contracts and Performance Swaps

The Company has an equity investment in a third party managed real estate mutual fund, accounted for as marketable equity securities carried at fair value. The Company had previously entered into a series of forward contracts on its shares in the mutual fund in an aggregate notional amount of $100 million, equal to its initial investment in the fund, and concurrently, entered into a series of swap contracts with the same counterparty to pay the return of the Dow Jones U.S. Select REIT Total Return Index. The Company settled the forwards and swaps in cash upon expiration in January 2020, realizing a gain of $5.8 million. In January 2020, the Company entered into another series of forward contracts with aggregate notional of $119 million, and swap contracts with the same counterparty, with similar terms to the previous transaction that required an initial combined collateral deposit of $14.3 million, subject to daily net settlements in net fair value changes in excess of a predetermined threshold. The forward and swap contracts were settled upon expiration in January 2021 through delivery of all of the Company's shares in the mutual fund, realizing an immaterial net loss.

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The forwards and swaps are not designated as hedges for accounting purposes. All realized and unrealized gains (losses) are recorded in other gain (loss) as follows:


	Year Ended December 31,
(In thousands)		2020		2019
Realized and unrealized gain (loss), net on derivatives:
Forward contracts		$	14,259	$	(16,915)
Performance swaps		1,164		4,493
Unrealized gain (loss) on marketable equity securities held at period end:
Real estate mutual fund		(14,290)		17,442

Offsetting Assets and Liabilities

The Company enters into agreements subject to enforceable master netting arrangements with its derivative counterparties that allow the Company to offset the settlement of derivative assets and liabilities in the same currency by derivative instrument type or, in the event of default by the counterparty, to offset all derivative assets and liabilities with the same counterparty. The Company has elected not to net derivative asset and liability positions, notwithstanding the conditions for right of offset may have been met, and presents derivative assets and liabilities with the same counterparty on a gross basis on the consolidated balance sheets.

The following table sets forth derivative positions where the Company has a right of offset under netting arrangements with the same counterparty.


	Gross Assets (Liabilities) on Consolidated Balance Sheets		Gross Amounts Not Offset on Consolidated Balance Sheets				Net Amounts of Assets (Liabilities)
(In thousands)			(Assets) Liabilities		Cash Collateral Pledged
December 31, 2020
Derivative Assets
Foreign exchange contracts	$	6	$	—	$	—	$	6
Interest rate contracts	93		—		—		93

	$	99	$	—	$	—	$	99
Derivative Liabilities
Foreign exchange contracts	$	(967)	$	—	$	—	$	(967)

Performance swaps	(149)		149		—		—
Forward contracts	(102,656)		(149)		15,913		(86,892)
	$	(103,772)	$	—	$	15,913	$	(87,859)

December 31, 2019
Derivative Assets
Foreign exchange contracts	$	16,578	$	(4,385)	$	—	$	12,193
Interest rate contracts	315		—		—		315
Performance swaps	4,493		(4,493)		—		—
	$	21,386	$	(8,878)	$	—	$	12,508
Derivative Liabilities
Foreign exchange contracts	$	(10,616)	$	4,385	$	—	$	(6,231)
Forward contracts	(116,915)		4,493		9,981		(102,441)
	$	(127,531)	$	8,878	$	9,981	$	(108,672)

12. Fair Value

Recurring Fair Values

The table below presents a summary of financial assets and financial liabilities carried at fair value on a recurring basis, including financial instruments for which the fair value option was elected, but excluding financial assets under the NAV practical expedient, categorized into the three tier fair value hierarchy that is prioritized based upon the level of transparency in inputs used in the valuation techniques.

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	Fair Value Measurement Hierarchy
(In thousands)	Level 1		Level 2		Level 3		Total
December 31, 2020
Assets
Marketable equity securities	$	218,485	$	—	$	—	$	218,485
AFS debt securities	—		—		28,576		28,576
Other assets—derivative assets	—		99		—		99
Fair Value Option:
Loans held for investment	—		—		1,295,337		1,295,337

Equity method investments	—		—		181,799		181,799
Liabilities
Other liabilities—derivative liabilities	—		103,772		—		103,772

Other liabilities—settlement liability	—		—		24,285		24,285
December 31, 2019
Assets
Marketable equity securities	$	138,586	$	—	$	—	$	138,586
AFS debt securities	—		—		54,859		54,859
CMBS of consolidated fund	—		2,732		—		2,732
Other assets—derivative assets	—		21,386		—		21,386
Fair Value Option:
Equity method investments	—		—		222,875		222,875
Liabilities
Other liabilities—derivative liabilities	—		127,531		—		127,531
Other liabilities—contingent consideration for THL Hotel Portfolio	—		—		9,330		9,330

Marketable Equity Securities

Marketable equity securities consist primarily of investment in a third party managed mutual fund and equity securities held by consolidated funds. These marketable equity securities are valued based on listed prices in active markets and classified as Level 1 of the fair value hierarchy.

Debt Securities

N-Star CDO bonds—Fair value of N-Star CDO bonds are determined internally based on recent trades, if any with such securitizations, the Company's knowledge of the underlying collateral and are determined using an internal price interpolated based on third party prices of the senior N-Star CDO bonds of the respective CDOs. All N-Star CDO bonds are classified as Level 3 of the fair value hierarchy.

CMBS of consolidated fund—Fair value was determined based on broker quotes or third party pricing services, classified as Level 2 of the fair value hierarchy. These CMBS were fully disposed of in the third quarter of 2020.

Derivatives

Derivative instruments consist of interest rate contracts and foreign exchange contracts that are generally traded over-the-counter, and are valued using a third-party service provider. Quotations on over-the-counter derivatives are not adjusted and are generally valued using observable inputs such as contractual cash flows, yield curve, foreign currency rates and credit spreads, and are classified as Level 2 of the fair value hierarchy. Although credit valuation adjustments, such as the risk of default, rely on Level 3 inputs, these inputs are not significant to the overall valuation of its derivatives. As a result, derivative valuations in their entirety are classified as Level 2 of the fair value hierarchy.

Other Liabilities—Contingent Consideration for THL Hotel Portfolio

In connection with the consensual foreclosure in July 2017 of a portfolio of limited service hotels ("THL Hotel Portfolio"), contingent consideration is payable to the former preferred equity holder of the borrower in an amount up to $13.0 million based upon the performance of the THL Hotel Portfolio, subject to meeting certain repayment and return thresholds to the Company and certain investment vehicles managed by the Company. The contingent consideration is measured based upon the probability of the former preferred equity holder receiving such payment, classified as Level 3 fair value. In the second quarter of 2020, the contingent consideration liability was determined to have zero value and was written off as a gain of $9.3 million, recorded in other gain (loss) within income (loss) from discontinued operations (Note 16). The Company determined that it was no longer probable that such payment would be made following the adverse effect of COVID-19 on the operations and performance of the THL Hotel Portfolio.

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Other Liabilities—Settlement Liability

In March 2020, the Company entered into a cooperation agreement with Blackwells Capital LLC ("Blackwells"), a stockholder of the Company. Pursuant to the cooperation agreement, Blackwells agreed to a standstill in its proxy contest with the Company, and to abide by certain voting commitments, including a standstill with respect to the Company until the expiration of the agreement in March 2030 and voting in favor of the Board of Director’s recommendations until the third anniversary of the agreement.

Contemporaneously, the Company and Blackwells entered into a joint venture arrangement for the purpose of acquiring, holding and disposing of the Company's class A common stock. Pursuant to the arrangement, the Company contributed its class A common stock, valued at $14.7 million by the venture, and Blackwells contributed $1.47 million of cash that was then distributed to the Company, resulting in a net capital contribution of $13.23 million by the Company in the venture. All of the class A common stock held in the venture had been repurchased by the Company in March 2020 (Note 14). Blackwells may cause the arrangement to be dissolved and all underlying assets distributed at any time, and the Company may do the same after three years. Distributions to be made through the joint venture arrangement effectively represent a settlement of the proxy contest with Blackwells. The initial fair value of the arrangement was recorded as a settlement loss on the statement of operations, with a corresponding liability on the balance sheet, subject to remeasurement at each period end.

The settlement liability is a fair value measure of the disproportionate allocation of future profits distribution to Blackwells pursuant to the joint venture arrangement. Such profits will be derived from dividend payments and any appreciation in value of the Company's class A common stock, allocated between the Company and Blackwells based upon specified return hurdles. The profits distribution is payable in cash, the Company's class A common stock or a combination of both at the Company's election. The initial fair value of the arrangement was recorded as a settlement loss on the statement of operations with a corresponding settlement liability on the consolidated balance sheer. The settlement liability, classified as a Level 3 fair value, is measured using a Monte Carlo simulation under a risk-neutral premise, assuming that the final distribution occurs at the end of the third year in March 2023, and is remeasured at each reporting period. At December 31, 2020, the settlement liability was valued at approximately $24.3 million, applying the following assumptions: (a) expected volatility of the Company's class A common stock of 67.2% based upon a combination of historical and implied volatility of the Company's class A common stock; (b) zero expected dividend yield given the Company's suspension of its common stock dividend beginning the second quarter of 2020; and (c) risk free rate of 0.14% per annum based upon a compounded zero-coupon U.S. Treasury yield. The settlement liability increased approximately $20.4 million from inception to December 31, 2020, recorded as other loss on the consolidated statement of operations.

Fair Value Option

Loans Receivable

Effective January 1, 2020, the Company elected the fair value option for all of its outstanding loans receivable. Loans receivable consist of mortgage loans, mezzanine loans and non-mortgage loans. Fair values were determined by comparing the current yield to the estimated yield of newly originated loans with similar credit risk or the market yield at which a third party might expect to purchase such investment; or based on discounted cash flow projections of principal and interest expected to be collected, which includes, but is not limited to, consideration of the financial standing of the borrower or sponsor as well as operating results and/or value of the underlying collateral.

Equity Method Investments

Equity method investments for which the fair value option was elected are carried at fair value on a recurring basis. Fair values are determined using either discounted cash flow models based on expected future cash flows for income and realization events of the underlying assets, applying revenue multiples, based on transaction price for recently acquired investments, pending or comparable market sales price on an investment, or based upon NAV of the underlying funds subject to adjustments. Fair value of equity method investments are classified as Level 3 of the fair value hierarchy, unless investments are valued based on contracted sales prices which are classified as Level 2 of the fair value hierarchy. Changes in fair value of equity method investments under the fair value option are recorded in equity method earnings.

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Level 3 Recurring Fair Value Measurements

Quantitative information about recurring Level 3 fair value assets are as follows.

Valuation Technique

Key Unobservable Inputs

Input Value

Effect on Fair Value from Increase in Input Value (2)

Financial Instrument

Fair Value

(In thousands)

Weighted Average(1)

(Range)

December 31, 2020

AFS debt securities

28,576

Discounted cash flows

Discount rate

28.9%
(18.3% - 57.8%)

Decrease

Fair Value Option:

Loans held for investment

1,295,337

Discounted cash flows

Discount rate

13.0%
(6.9% - 25.7%)

Decrease

Equity method investments—third party private equity funds

2,472

NAV(3)

N/A

Equity method investments—other

36,923

Discounted cash flows

Discount rate

27.5%
(19.0% - 30.0%)

Decrease

Equity method investments—other

142,404

Transaction price(5)

N/A

December 31, 2019

AFS debt securities

54,859

Discounted cash flows

Discount rate

22.3%

(16.8% - 65.0%)

Decrease

Fair Value Option:

Equity method investments—third party private equity funds

5,391

NAV(3)

N/A

Equity method investments—other

18,574

Discounted cash flows

Discount rate

10.1%

(5.1% - 15.8%)

Decrease

Equity method investments—other

25,000

Multiple

Revenue multiple

3.7x

(4)

Equity method investments—other

173,910

Transaction price(5)

N/A

__________

(1) Weighted average discount rates are calculated based upon undiscounted cash flows.

(2) Represents the directional change in fair value that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the reverse effect. Significant increases or decreases in these inputs in isolation could result in significantly higher or lower fair value measures.

(3) Fair value was estimated based on underlying NAV of the respective funds on a quarter lag, adjusted as deemed appropriate by management, considering the cash flows provided by the general partners of the funds and the implied yields of the funds.

(4) Fair value is affected by change in revenue multiple relative to change in rate of revenue growth.

(5) Valued based upon transaction price of investments recently acquired, settlement amounts under contract, or offer prices on loans, investments or underlying assets of investee pending sales. Transaction price approximates fair value for investee engaged in real estate development during the development stage.

The following table presents changes in recurring Level 3 fair value assets and liabilities, including realized and unrealized gains (losses) included in other gain (loss) on the consolidated statement of operations and in AOCI.


	Level 3 Assets								Level 3 Liability
					Fair Value Option
(In thousands)	Securitized Loans Receivable		AFS Debt Securities		Loans Held for Investment		Equity Method Investments		Debt—Securitized Bonds Payable
Fair value at December 31, 2017	$	45,423	$	323,243	$	—	$	363,901	$	(44,542)
Purchases, contribution or accretion	—		21,049		—		61,113		—
Paydowns or distributions	(638)		(138,261)		—		(188,409)		638
Contribution to CLNC	—		—		—		(26,134)		—
Deconsolidation	(44,070)		(124,344)		—		—		43,847
Transfers out of Level 3 (1)	—		—		—		(132,527)		—
Realized and unrealized gains (losses) in earnings, net	(715)		3,877		—		3,141		57
Other comprehensive income (2)	—		(21,437)		—		—		—
Fair value at December 31, 2018	$	—	$	64,127	$	—	$	81,085	$	—

Net unrealized gains (losses) in earnings on instruments held at December 31, 2018	$	(715)	$	—	$	—	$	(67)	$	57

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	Level 3 Assets								Level 3 Liability
					Fair Value Option
(In thousands)	Securitized Loans Receivable		AFS Debt Securities		Loans Held for Investment		Equity Method Investments		Debt—Securitized Bonds Payable
Fair value at December 31, 2018	$	—	$	64,127	$	—	$	81,085	$	—
Purchases, contributions and accretion	—		6,380		—		141,070		—
Paydowns, distributions and sales	—		(10,779)		—		(8,338)		—
Realized and unrealized gains (losses) in earnings, net	—		(16,920)		—		9,058		—
Other comprehensive income (2)	—		12,051		—		—		—
Fair value at December 31, 2019	$	—	$	54,859	$	—	$	222,875	$	—

Net unrealized gains (losses) in earnings on instruments held at December 31, 2019	$	—	$	(16,920)	$	—	$	8,280	$	—

Fair value at December 31, 2019	$	—	$	54,859	$	—	$	222,875	$	—
Election of fair value option on January 1, 2020	—		—		1,556,131		—		—
Reclassification of accrued interest on January 1, 2020	—		—		13,504		—		—
Purchases, drawdowns, contributions and accretion	—		4,043		195,414		6,539		—
Paydowns, distributions and sales	—		(5,784)		(274,100)		(967)		—

Change in accrued interest and capitalization of paid-in-kind interest	—		—		33,033		—		—


Allowance for credit losses	—		(24,688)		—		—		—
Realized and unrealized gains (losses) in earnings, net	—		—		(299,405)		(58,873)		—
Other comprehensive income (loss) (2)	—		146		70,760		12,225		—
Fair value at December 31, 2020	$	—	$	28,576	$	1,295,337	$	181,799	$	—

Net unrealized gains (losses) on instruments held at December 31, 2020
In earnings	—		$	—	$	(272,084)	$	(58,873)	$	—
In other comprehensive income (loss)	$	—	$	146	N/A		N/A		$	—

__________

(1) Assets transferred out of Level 3 represent investments in third party private equity funds that were valued based on their contracted sales price and subsequently sold in 2018.

(2) Amounts recorded in OCI for loans receivable and equity method investments represent foreign currency translation differences on the Company's foreign subsidiaries that hold the respective foreign currency denominated investments.

Securitized Loans and Securitized Bonds

Prior to May 2018, the Company had elected the fair value option for loans receivable and bonds payable issued by a securitization trust that was consolidated by a N-Star CDO. The N-Star CDO was in turn consolidated by the Company. In May 2018, the Company sold its interests in the N-Star CDO and deconsolidated the N-Star CDO along with the securitization trust consolidated by the N-Star CDO.

Prior to deconsolidation, the Company had adopted the measurement alternative to measure the fair value of the loans receivable held by the securitization trust using the fair value of the bonds payable issued by the securitization trust as the latter represented the more observable fair value. As such, the net gain or loss that was reflected in earnings was limited to changes in fair value of the beneficial interest held by the Company in the previously consolidated securitization trust, and not as a result of a remeasurement of the loans receivable and bonds payable held by third parties in the previously consolidated securitization trust. Fair value of the bonds payable issued by the securitization trust was determined based on broker quotes, which were generally derived from unobservable inputs, and therefore classified as Level 3 of the fair value hierarchy. Correspondingly, the fair value of the loans receivable held by the securitization trust was also classified as Level 3.

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Investments Carried at Fair Value Using Net Asset Value

Investments in a Company-sponsored private fund and a non-traded REIT, and limited partnership interest in a third party private fund are valued using NAV of the respective vehicles.


	December 31, 2020				December 31, 2019
(In thousands)	Fair Value		Unfunded Commitments		Fair Value		Unfunded Commitments
Private fund—real estate	$	15,680	$	8,026	$	16,271	$	11,058
Non-traded REIT—real estate	18,272		—		19,358		—
Private fund—emerging market private equity	2,224		—		3,012		—

The Company's interests in the private funds are not subject to redemption, with distributions to be received through liquidation of underlying investments of the funds. The private funds each have eight and ten year lives, respectively, at inception, both of which may be extended in one year increments up to two years.

No secondary market currently exists for shares of the non-traded REIT and the Company does not currently expect to seek liquidity of its shares of the non-traded REIT. Subject to then-existing market conditions, the board of directors of the non-traded REIT, along with the Company, as sponsor, expects to consider alternatives for providing liquidity to the non-traded REIT shares beginning five years from completion of the offering stage in January 2016, but with no definitive date by which it must do so. In addition, the Company has agreed that any right to have its shares redeemed is subordinated to third party stockholders for so long as its advisory agreement is in effect.

Nonrecurring Fair Values

The Company measures fair value of certain assets on a nonrecurring basis when events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Adjustments to fair value generally result from the application of lower of amortized cost or fair value accounting for assets held for disposition or otherwise, write-down of asset values due to impairment. Impairments are discussed in Note 4 for real estate, Note 6 for equity method investments, and Note 7 for investment management intangible assets, including goodwill.

Fair Value Information on Financial Instruments Reported at Cost

Carrying amounts and estimated fair values of financial instruments reported at amortized cost are presented below. The carrying values of cash, accounts receivable, due from and to affiliates, interest payable and accounts payable approximate fair value due to their short term nature and credit risk, if any, are negligible. There are no loans receivable carried at amortized cost in 2020 as the Company elected the fair value option for all loans receivable effective January 1, 2020.


	Fair Value Measurements								Carrying Value
(In thousands)	Level 1		Level 2		Level 3		Total
December 31, 2020
Liabilities
Debt at amortized cost

Convertible and exchangeable senior notes	$	898,231	$	13,095	$	—	$	911,326	$	535,897
Secured debt	—		—		6,927,743		6,927,743		7,049,993
Secured debt related to assets held for disposition	—		—		3,333,651		3,333,651		3,494,079
Junior subordinated debt	—		—		201,018		201,018		203,848
December 31, 2019
Assets
Loans at amortized cost	$	—	$	—	$	1,557,850	$	1,557,850	$	1,552,824
Liabilities
Debt at amortized cost

Convertible and exchangeable senior notes	602,000		13,095		—		615,095		614,052
Secured debt	—		—		4,747,560		4,747,560		4,702,676
Secured debt related to assets held for disposition	—		—		3,700,990		3,700,990		3,698,934
Junior subordinated debt	—		—		225,835		225,835		201,190

Debt—Fair value of convertible notes and exchangeable notes were determined using the last trade price in active markets and unadjusted quoted prices in non-active market, respectively. Fair values of the corporate credit facility and

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secured debt were estimated by discounting expected future cash outlays at interest rates available to the Company for similar instruments. Fair value of junior subordinated debt was based on unadjusted quotations from a third party valuation firm, with such quotes derived using a combination of internal valuation models, comparable trades in non-active markets and other market data.

Other—Carrying values of cash, due from and to affiliates, other receivables and other payables generally approximate fair value due to their short term nature, and credit risk, if any, are negligible.

13. Variable Interest Entities

A VIE is an entity that lacks sufficient equity to finance its activities without additional subordinated financial support from other parties, or whose equity holders lack the characteristics of a controlling financial interest. The following discusses the Company's involvement with VIEs where the Company is the primary beneficiary and consolidates the VIEs or where the Company is not the primary beneficiary and does not consolidate the VIEs.

Operating Subsidiary

The Company's operating subsidiary, OP, is a limited liability company that has governing provisions that are the functional equivalent of a limited partnership. The Company holds the majority of membership interest in OP, acts as the managing member of OP and exercises full responsibility, discretion and control over the day-to-day management of OP. The noncontrolling interests in OP do not have substantive liquidation rights, substantive kick-out rights without cause, or substantive participating rights that could be exercised by a simple majority of noncontrolling interest members (including by such a member unilaterally). The absence of such rights, which represent voting rights in a limited partnership equivalent structure, would render OP to be a VIE. The Company, as managing member, has the power to direct the core activities of OP that most significantly affect OP's performance, and through its majority interest in OP, has both the right to receive benefits from and the obligation to absorb losses of OP. Accordingly, the Company is the primary beneficiary of OP and consolidates OP. As the Company conducts its business and holds its assets and liabilities through OP, the total assets and liabilities of OP represent substantially all of the total consolidated assets and liabilities of the Company.

Company-Sponsored Private Funds

The Company sponsors private funds and other investment vehicles as general partner for the purpose of providing investment management services in exchange for management fees and performance-based fees. These private funds are established as limited partnerships or equivalent structures. Limited partners of the private funds do not have either substantive liquidation rights, or substantive kick-out rights without cause, or substantive participating rights that could be exercised by a simple majority of limited partners or by a single limited partner. Accordingly, the absence of such rights, which represent voting rights in a limited partnership, results in the private funds being considered VIEs. The nature of the Company's involvement with its sponsored funds comprise fee arrangements and equity interests. The fee arrangements are commensurate with the level of management services provided by the Company, and contain terms and conditions that are customary to similar at-market fee arrangements.

Consolidated Company-Sponsored Private Funds—The Company currently consolidates sponsored private funds in which it has more than an insignificant equity interest in the fund as general partner. As a result, the Company is considered to be acting in the capacity of a principal of the sponsored private fund and is therefore the primary beneficiary of the fund. The Company’s exposure is limited to the value of its outstanding investment in the consolidated private funds of $46.5 million at December 31, 2020 and $18.5 million at December 31, 2019. The Company, as general partner, is not obligated to provide any financial support to the consolidated private funds. At December 31, 2020 and 2019, the consolidated private funds had total assets of $172.2 million and $24.7 million, respectively, and total liabilities of $41.8 million and $0.1 million, respectively, made up primarily of cash, marketable equity securities and unsettled trades.

Unconsolidated Company-Sponsored Private Funds—The Company does not consolidate its sponsored private funds where it has insignificant direct equity interests or capital commitments to these funds as general partner. The Company may invest alongside certain of its sponsored private funds through joint ventures between the Company and these funds, or the Company may have capital commitments to its sponsored private funds that are satisfied directly through the co-investment joint ventures as an affiliate of the general partner. In these instances, the co-investment joint ventures are consolidated by the Company. As the Company's direct equity interests in its sponsored private funds as general partner absorb insignificant variability, the Company is considered to be acting in the capacity of an agent of these funds and is therefore not the primary beneficiary of these funds. The Company accounts for its equity interests in unconsolidated sponsored private funds under the equity method. The Company's maximum exposure to loss is limited to the carrying value of its investment in the unconsolidated sponsored private funds, totaling $214.4 million at December 31, 2020 and $137.0 million at December 31, 2019, included within equity and debt investments and additionally at December 31, 2019, within assets held for disposition, on the consolidated balance sheets.

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Securitizations

The Company previously securitized loans receivable and CRE debt securities using VIEs. Upon securitization, the Company had retained beneficial interests in the securitization vehicles, usually in the form of equity tranches or subordinate securities. The Company also acquired securities issued by securitization trusts that are VIEs. The securitization vehicles were structured as pass-through entities that receive principal and interest on the underlying mortgage loans and debt securities and distribute those payments to the holders of the notes, certificates or bonds issued by the securitization vehicles. The loans and debt securities were transferred into securitization vehicles such that these assets are restricted and legally isolated from the creditors of the Company, and therefore are not available to satisfy the Company's obligations but only the obligations of the securitization vehicles. The obligations of the securitization vehicles did not have any recourse to the general credit of the Company and its other subsidiaries.

Unconsolidated Securitizations—The Company does not consolidate the assets and liabilities of CDOs in which the Company has an interest but does not retain the collateral management function. NRF Holdco had previously delegated the collateral management rights for certain sponsored N-Star CDOs and third party-sponsored CDOs to a third party collateral manager or collateral manager delegate who is entitled to a percentage of the senior and subordinate collateral management fees. The Company continues to receive fees as named collateral manager or collateral manager delegate and retained administrative responsibilities. The Company determined that the fees paid to the third party collateral manager or collateral manager delegate represent a variable interest in the CDOs and that the third party is acting as a principal. The Company concluded that it does not have the power to direct the activities that most significantly impact the economic performance of these CDOs, which include but are not limited to, the ability to sell distressed collateral, and therefore the Company is not the primary beneficiary of such CDOs and does not consolidate these CDOs. The Company’s exposure to loss is limited to its investment in these unconsolidated CDOs, comprising CDO bonds, which aggregate to $21.9 million at December 31, 2020 and $46.0 million at December 31, 2019.

Trusts

The Trusts, wholly-owned subsidiaries of NRF Holdco, formed as statutory trusts, previously issued preferred securities and used the proceeds to purchase junior subordinated notes to evidence loans made to NRF Holdco (Note 10). The Company owns all of the common stock of the Trusts but does not consolidate the Trusts as the holders of the preferred securities issued by the Trusts are the primary beneficiaries of the Trusts. The Company accounts for its interest in the Trusts under the equity method and its maximum exposure to loss is limited to its investment carrying value of $3.7 million at December 31, 2020 and December 31, 2019, recorded in investments in unconsolidated ventures on the consolidated balance sheet. The junior subordinated notes are recorded as debt on the consolidated balance sheet.

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14. Stockholders’ Equity

The table below summarizes the share activities of the Company's preferred and common stock.


	Number of Shares
(In thousands)	Preferred Stock	Class A Common Stock	Class B Common Stock
Shares outstanding at December 31, 2017	65,464	542,599	736
Redemption of preferred stock	(8,000)	—	—
Shares issued upon redemption of OP Units (1)	—	2,074	—
Shares issued for settlement of contingent consideration—Internalization	—	15	40
Conversion of class B to class A common stock	—	42	(42)
Repurchase of common stock	—	(61,418)	—
Equity-based compensation, net of forfeitures	—	3,394	—
Shares canceled for tax withholding on vested stock awards	—	(3,359)	—
Shares outstanding at December 31, 2018	57,464	483,347	734


Redemption of preferred stock	(16,114)	—	—
Shares issued upon redemption of OP Units	—	188	—
Repurchase of common stock	—	(652)	—
Equity-based compensation, net of forfeitures	—	4,850	—
Shares canceled for tax withholding on vested stock awards	—	(689)	—
Shares outstanding at December 31, 2019	41,350	487,044	734





Shares issued upon redemption of OP Units	—	2,184	—

Repurchase of common stock, net (2)	—	(12,733)	—
Equity-based compensation, net of forfeitures	—	9,680	—
Shares canceled for tax withholding on vested stock awards	—	(2,769)	—
Shares outstanding at December 31, 2020	41,350	483,406	734

__________

(1) Includes 572,567 shares of class A common stock issued upon redemption of an equivalent number of OP Units that were issued for settlement of the contingent consideration in connection with the Company's acquisition of the investment management business and operations of its former manager in 2015 (the "Internalization").

(2) Net of reissuance of 964,160 shares of class A common stock that had been repurchased by the Company during March 2020. Refer to discussion of settlement liability in Note 12.

Preferred Stock

In the event of a liquidation or dissolution of the Company, preferred stockholders have priority over common stockholders for payment of dividends and distribution of net assets.

The table below summarizes the preferred stock issued and outstanding at December 31, 2020:


Description	Dividend Rate Per Annum		Initial Issuance Date	Shares Outstanding (in thousands)	Par Value (in thousands)		Liquidation Preference (in thousands)		Earliest Redemption Date
Series G	7.5	%	June 2014	3,450	$	35	$	86,250	Currently redeemable
Series H	7.125	%	April 2015	11,500	115		287,500		Currently redeemable
Series I	7.15	%	June 2017	13,800	138		345,000		June 5, 2022
Series J	7.125	%	September 2017	12,600	126		315,000		September 22, 2022
				41,350	$	414	$	1,033,750

All series of preferred stock are at parity with respect to dividends and distributions, including distributions upon liquidation, dissolution or winding up of the Company. Dividends on Series G, H, I and J of preferred stock are payable quarterly in arrears in January, April, July and October.

Each series of preferred stock is redeemable on or after the earliest redemption date for that series at $25.00 per share plus accrued and unpaid dividends (whether or not declared) exclusively at the Company’s option. The redemption period for each series of preferred stock is subject to the Company’s right under limited circumstances to redeem the preferred stock earlier in order to preserve its qualification as a REIT or upon the occurrence of a change of control (as defined in the articles supplementary relating to each series of preferred stock).

Preferred stock generally does not have any voting rights, except if the Company fails to pay the preferred dividends for six or more quarterly periods (whether or not consecutive). Under such circumstances, the preferred stock will be

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entitled to vote, together as a single class with any other series of parity stock upon which like voting rights have been conferred and are exercisable, to elect two additional directors to the Company’s board of directors, until all unpaid dividends have been paid or declared and set aside for payment. In addition, certain changes to the terms of any series of preferred stock cannot be made without the affirmative vote of holders of at least two-thirds of the outstanding shares of each such series of preferred stock voting separately as a class for each series of preferred stock.

Redemption of Preferred Stock

The Company redeemed the remaining outstanding shares of Series B preferred stock and all outstanding shares of Series E preferred stock in December 2019, with settlement in January 2020, for $402.9 million, applying proceeds from the sale of its light industrial business. In 2018, all outstanding shares of Series D preferred stock were redeemed.

All preferred stock redemptions were at $25.00 per share liquidation preference plus accrued and unpaid dividends prorated to their respective redemption dates. The excess or deficit of the $25.00 per share liquidation preference over the carrying value of the respective preferred stock redeemed results in a decrease or increase to net income attributable to common stockholders, respectively.

Common Stock

Except with respect to voting rights, class A common stock and class B common stock have the same rights and privileges and rank equally, share ratably in dividends and distributions, and are identical in all respects as to all matters. Class A common stock has one vote per share and class B common stock has thirty-six and one-half votes per share. This gives the holders of class B common stock a right to vote that reflects the aggregate outstanding non-voting economic interest in the Company (in the form of OP Units) attributable to class B common stock holders and therefore, does not provide any disproportionate voting rights. Class B common stock was issued as consideration in the Company's acquisition in April 2015 of the investment management business and operations of its former manager, which was previously controlled by the Company's Executive Chairman. Each share of class B common stock shall convert automatically into one share of class A common stock if the Executive Chairman or his beneficiaries directly or indirectly transfer beneficial ownership of class B common stock or OP Units held by them, other than to certain qualified transferees, which generally includes affiliates and employees. In addition, each holder of class B common stock has the right, at the holder’s option, to convert all or a portion of such holder’s class B common stock into an equal number of shares of class A common stock.

The Company suspended dividends on its class A common stock beginning with the second quarter of 2020. Under the terms of the Company's amended credit facility, the Company is restricted from paying common dividends other than to maintain the Company’s status as a REIT or to reduce income tax payments. The Company will continue to monitor its financial performance and liquidity position, and as economic conditions improve, the Company will reevaluate its dividend policy in consultation with its revolver lending group.

Common Stock Repurchases

During the first quarter of 2020 and for the years ended December 31, 2019 and 2018, the Company repurchased its class A common stock totaling 12,733,204 shares at a cost of $24.6 million, 652,311 shares at a cost of $3.2 million, and 61,417,755 shares at a cost $350.1 million, respectively, or a weighted average price of $1.93, $4.84 and $5.70 per share, respectively. These share repurchases were made pursuant to a $300 million share repurchase program that expired in May 2020 and a similar program that expired in May 2019.

Effective June 29, 2020, the Company is restricted from repurchasing additional common shares, subject to certain exceptions, under the terms of its amended corporate credit facility (Note 10).

Dividend Reinvestment and Direct Stock Purchase Plan

The Company's Dividend Reinvestment and Direct Stock Purchase Plan (the “DRIP Plan”) provides existing common stockholders and other investors the opportunity to purchase shares (or additional shares, as applicable) of the Company's class A common stock by reinvesting some or all of the cash dividends received on their shares of the Company's class A common stock or making optional cash purchases within specified parameters. The DRIP Plan involves the acquisition of the Company's class A common stock either in the open market, directly from the Company as newly issued common stock, or in privately negotiated transactions with third parties. There were no shares of class A common stock acquired under the DRIP Plan in the form of new issuances in 2020 and 2019.

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Accumulated Other Comprehensive Income (Loss)

The following tables present the changes in each component of AOCI attributable to stockholders and noncontrolling interests in investment entities, net of immaterial tax effect. AOCI attributable to noncontrolling interests in Operating Company is immaterial.

Changes in Components of AOCI—Stockholders


(In thousands)	Company's Share in AOCI of Equity Method Investments		Unrealized Gain (Loss) on AFS Debt Securities		Unrealized Gain (Loss) on Cash Flow Hedges		Foreign Currency Translation Gain (Loss)		Unrealized Gain (Loss) on Net Investment Hedges		Total
AOCI at December 31, 2017	$	5,616	$	14,418	$	—	$	45,931	$	(18,649)	$	47,316
Cumulative effect of adoption of new accounting pronouncements	(202)		—		—		—		—		(202)
Other comprehensive income (loss) before reclassifications	(1,785)		(16,238)		(91)		(46,183)		34,113		(30,184)
Amounts reclassified from AOCI	—		(3,951)		—		6,870		(8,446)		(5,527)
Deconsolidation of N-Star CDO	—		2,596		—		—		—		2,596
AOCI at December 31, 2018	$	3,629	$	(3,175)	$	(91)	$	6,618	$	7,018	$	13,999
Other comprehensive income (loss) before reclassifications	9,206		(4,358)		(2,563)		(5,398)		24,945		21,832
Amounts reclassified from AOCI	(3,554)		15,356		2,428		(1,081)		(1,312)		11,837
AOCI at December 31, 2019	$	9,281	$	7,823	$	(226)	$	139	$	30,651	$	47,668


Other comprehensive income (loss) before reclassifications	8,437		1,844		(7)		52,468		16,008		78,750
Amounts reclassified from AOCI	—		(3,595)		—		225		(925)		(4,295)
AOCI at December 31, 2020	$	17,718	$	6,072	$	(233)	$	52,832	$	45,734	$	122,123

Changes in Components of AOCI—Noncontrolling Interests in Investment Entities


(In thousands)	Unrealized Gain (Loss) on Cash Flow Hedges		Foreign Currency Translation Gain (Loss)		Unrealized Gain (Loss) on Net Investment Hedges		Total
AOCI at December 31, 2017	$	—	$	38,948	$	3,127	$	42,075
Other comprehensive income (loss) before reclassifications	(390)		(39,621)		8,696		(31,315)
Amounts reclassified from AOCI	—		73		(2,179)		(2,106)
AOCI at December 31, 2018	$	(390)	$	(600)	$	9,644	$	8,654
Other comprehensive income (loss) before reclassifications	(5,943)		(16,848)		(1,291)		(24,082)
Amounts reclassified from AOCI	5,328		(465)		2,306		7,169
AOCI at December 31, 2019	$	(1,005)	$	(17,913)	$	10,659	$	(8,259)


Other comprehensive income (loss) before reclassifications	(25)		101,853		5,313		107,141
Amounts reclassified from AOCI	—		(95)		(873)		(968)
AOCI at December 31, 2020	$	(1,030)	$	83,845	$	15,099	$	97,914

Reclassifications out of AOCI—Stockholders

Information about amounts reclassified out of AOCI attributable to stockholders by component is presented below:


(In thousands)	Year Ended December 31,					Affected Line Item in the Consolidated Statements of Operations
Component of AOCI reclassified into earnings		2020		2019				2018
Realized gain on marketable securities		$	—	$	—	$	10,100		Other gain (loss), net
Relief of basis of AFS debt securities		3,595		—		—			Other gain (loss), net
Other-than-temporary impairment		—		(15,356)		(6,149)			Other gain (loss), net
Deconsolidation of N-Star CDO		—		—		(2,596)			Other gain (loss), net
Release of foreign currency cumulative translation adjustments		(225)		1,081		(6,870)			Other gain (loss), net
Unrealized gain (loss) on dedesignated net investment hedges		552		(340)		1,454			Other gain (loss), net
Realized gain on net investment hedges		373		1,652		6,992			Other gain (loss), net
Release of equity in AOCI of unconsolidated ventures		—		3,554		—			Equity method earnings (losses)

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15. Noncontrolling Interests

Redeemable Noncontrolling Interests

The following table presents the activity in redeemable noncontrolling interests in the Company's digital investment management business and in consolidated open-end funds sponsored by the Company.


	Year Ended December 31,
(In thousands)	2020		2019		2018
Beginning balance	$	6,107	$	9,385	$	34,144
Contributions	307,414		—		354
Distributions and redemptions	(8,859)		(5,837)		(21,405)
Net income (loss)	616		2,559		(3,708)

Ending balance	$	305,278	$	6,107	$	9,385

Strategic Partnership in the Company's Digital Investment Management Business

In July 2020, the Company formed a strategic partnership with affiliates of Wafra, Inc. (collectively, "Wafra"), a private investment firm and a global partner for alternative asset managers, in which Wafra made a minority investment in substantially all of the Company's digital investment management business (as defined for purposes of this transaction, the "Digital IM Business"). The investment entitles Wafra to participate in approximately 31.5% of the net management fees and carried interest generated by the Digital IM Business.

Wafra has agreed to assume certain of the Company's existing commitments made to DCP I and to make commitments to DCP II and to the Company’s initial digital credit fund, in an aggregate amount of at least $130.0 million. Wafra has also agreed to make commitments to the Company's future digital funds and investment vehicles on a pro rata basis with the Company based on Wafra's percentage interest in the Digital IM Business, subject to certain caps.

In addition, the Company issued Wafra five warrants to purchase up to an aggregate of 5% (on a fully-diluted, post-transaction basis) of the Company’s class A common stock. Each warrant entitles Wafra to purchase up to 5,352,000 shares of the Company's class A common stock, with staggered strike prices between $2.43 and $6.00 for each warrant, exercisable until July 17, 2026.

Consideration paid by Wafra in exchange for its investment in the Digital IM Business and for the warrants is composed of: (i) cash consideration of $253.6 million paid at closing; and (ii) contingent consideration of approximately $29.9 million to be paid if the run-rate of earnings before interest, tax, depreciation and amortization ("EBITDA") of the Digital IM Business is equal to or greater than $72.0 million as of December 31, 2020.

Under certain circumstances following such time as the Digital IM Business comprises 90% or more of the Company's assets, the Company has agreed to use commercially reasonable efforts to facilitate the conversion of Wafra's interest into shares of the Company's class A common stock. There can be no assurances that such conversion would occur or on what terms and conditions such conversion would occur, including whether such conversion, if it did occur in the future, would have any adverse impact on the Company, the Company’s stock price, governance and other matters.

Wafra has customary minority rights and certain other structural protections designed to protect its interests, including redemption rights with respect to its investment in the Digital IM Business and its funded commitments in certain digital funds. Wafra's redemption rights will be triggered upon the occurrence of certain events, including key person or cause events under the governing documents of certain digital funds and for a limited period, upon Mr. Ganzi and Mr. Jenkins ceasing to fulfill certain time and attention commitments to the Digital IM business.

To further enhance the alignment of interests, the Company entered into an amended and restated restrictive covenant agreement with each of Mr. Ganzi and Mr. Jenkins, pursuant to which they agreed to certain enhanced non-solicitation provisions and extension of the term of existing non-competition agreements.

Wafra’s investment provides the Company with permanent capital to pursue strategic digital infrastructure investments and grow the Digital IM Business.

Noncontrolling Interests in Investment Entities

These are interests in consolidated investment entities held by private investment funds managed by the Company, or by third party joint venture partners.

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The Company's investment in its light industrial portfolio, prior to its sale in December 2019, was made alongside third party limited partners through a joint venture consolidated by the Company. The Company's ownership interest changed over time as result of capital contributions from or redemptions of limited partner interests. Limited partners were admitted or redeemed at the net asset value of the joint venture, based upon valuations determined by independent third parties, at the time of their contributions or redemptions. For the years ended December 31, 2019 and 2018, the difference between contributions or redemptions and the respective limited partners' share of the joint venture resulted in a net increase to additional paid-in capital of $12.4 million and $34.1 million, respectively.

Noncontrolling Interests in Operating Company

Certain current and former employees of the Company directly or indirectly own interests in OP, presented as noncontrolling interests in the Operating Company. Noncontrolling interests in OP have the right to require OP to redeem part or all of such member’s OP Units for cash based on the market value of an equivalent number of shares of class A common stock at the time of redemption, or at the Company's election as managing member of OP, through issuance of shares of class A common stock (registered or unregistered) on a one-for-one basis. At the end of each period, noncontrolling interests in OP is adjusted to reflect their ownership percentage in OP at the end of the period, through a reallocation between controlling and noncontrolling interests in OP.

Issuance of OP Units—The Company issued 21,478,515 OP Units in July 2019 and 612,072 OP Units in December 2019 as part of the consideration for the acquisitions of DBH, valued at $111.9 million, and DataBank, valued at $3.0 million, based upon the closing price of the Company's class A common stock on July 24, 2019 and December 20, 2019, respectively (Note 3). There were no OP Units issued in the year ended December 31, 2020.

Redemption of OP Units—The Company redeemed 2,184,395 OP Units during the year ended December 31, 2020 and 187,995 OP Units during the year ended December 31, 2019, with the issuance of an equal number of shares of class A common stock on a one-for-one basis.

16. Discontinued Operations

Discontinued operations represent the following:

•Hotel—operations of the Company's Hospitality segment and the THL Hotel Portfolio in the Other segment in all periods; and

•Industrial—(i) operations of the light industrial portfolio and the related management platform prior to its sale in December 2019, which included fee income and general partner interest in the industrial open-end fund that earned carried interest, and interests of all limited partners in the industrial closed-end and open-end funds who represented noncontrolling interests; (ii) final adjustments to net sales proceeds from the light industrial business upon release of escrowed funds in 2020, resulting in a net loss of $7.4 million; and (iii) operations of the bulk industrial portfolio prior to its sale in December 2020 and a gain on sale recorded based upon depreciated carrying values.

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Income (loss) from discontinued operations is presented below.


	Year Ended December 31, 2020						Year Ended December 31, 2019						Year Ended December 31, 2018
(In thousands)	Hotel		Industrial		Total		Hotel		Industrial		Total		Hotel		Industrial		Total
Revenues
Property operating income	$	573,787	$	20,217	$	594,004	$	1,119,045	$	346,431	$	1,465,476	$	1,193,636	$	288,367	$	1,482,003
Fee income	—		—		—		—		11,646		11,646		—		7,378		7,378
Interest and other income	185		79		264		486		5,163		5,649		1,374		3,775		5,149
Revenues from discontinued operations	573,972		20,296		594,268		1,119,531		363,240		1,482,771		1,195,010		299,520		1,494,530
Expenses
Property operating expense	489,975		5,993		495,968		757,555		93,440		850,995		805,161		84,162		889,323
Interest expense	157,287		6,665		163,952		228,729		91,863		320,592		218,278		42,713		260,991
Investment and servicing expense	16,811		20		16,831		17,612		658		18,270		15,033		436		15,469
Transaction costs	4,500		—		4,500		—		—		—		—		—		—
Depreciation and amortization	144,499		2,340		146,839		182,198		106,470		288,668		191,321		129,104		320,425
Impairment loss	1,107,133		—		1,107,133		59,913		—		59,913		86,841		948		87,789
Compensation expense—cash and equity-based (1)	4,395		82		4,477		5,322		29,791		35,113		6,512		11,156		17,668
Compensation expense—carried interest	—		(489)		(489)		—		35,170		35,170		—		4,696		4,696
Administrative expenses	2,937		1,199		4,136		2,252		6,089		8,341		1,682		4,803		6,485
Expenses from discontinued operations	1,927,537		15,810		1,943,347		1,253,581		363,481		1,617,062		1,324,828		278,018		1,602,846
Other income (loss)
Gain on sale of real estate	—		15,936		15,936		913		1,457,892		1,458,805		4,618		7,633		12,251
Other gain (loss), net	9,732		—		9,732		804		1,338		2,142		(1,460)		—		(1,460)
Equity method earnings (losses), including carried interest	—		(115)		(115)		—		41,258		41,258		—		10,636		10,636
Income (loss) from discontinued operations before income taxes	(1,343,833)		20,307		(1,323,526)		(132,333)		1,500,247		1,367,914		(126,660)		39,771		(86,889)
Income tax benefit (expense)	(2,662)		15		(2,647)		(27)		1,550		1,523		9,866		(189)		9,677
Income (loss) from discontinued operations	(1,346,495)		20,322		(1,326,173)		(132,360)		1,501,797		1,369,437		(116,794)		39,582		(77,212)
Income (loss) from discontinued operations attributable to:
Noncontrolling interests in investment entities	(172,419)		10,651		(161,768)		(20,758)		989,358		968,600		(14,380)		21,260		6,880
Noncontrolling interests in Operating Company	(116,350)		955		(115,395)		(9,404)		49,391		39,987		(6,074)		1,113		(4,961)
Income (loss) from discontinued operations attributable to Colony Capital, Inc.	$	(1,057,726)	$	8,716	$	(1,049,010)	$	(102,198)	$	463,048	$	360,850	$	(96,340)	$	17,209	$	(79,131)

__________

(1) Includes equity-based compensation of $0.8 million in 2020, $9.7 million in 2019 and $4.0 million in 2018.

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17. Earnings per Share

The following table provides the basic and diluted earnings per common share computations:


	Year Ended December 31,
(In thousands, except per share data)		2020		2019		2018
Net loss allocated to common stockholders
Loss from continuing operations		$	(2,464,237)	$	(1,518,352)	$	(417,963)
(Income) loss from continuing operations attributable to noncontrolling interests		837,488		108,695		(22,513)
Loss from continuing operations attributable to Colony Capital, Inc.		(1,626,749)		(1,409,657)		(440,476)
Income (loss) from discontinued operations attributable to Colony Capital, Inc.		(1,049,010)		360,850		(79,131)
Net loss attributable to Colony Capital, Inc.		(2,675,759)		(1,048,807)		(519,607)

Preferred dividends		(75,023)		(108,550)		(117,097)
Net loss attributable to common stockholders		(2,750,782)		(1,152,207)		(632,709)
Net income allocated to participating securities		(1,250)		(3,491)		(2,504)
Net loss allocated to common stockholders—basic		(2,752,032)		(1,155,698)		(635,213)
Interest expense attributable to convertible and exchangeable notes (1)		—		—		—
Net loss allocated to common stockholders—diluted		$	(2,752,032)	$	(1,155,698)	$	(635,213)
Weighted average common shares outstanding
Weighted average number of common shares outstanding—basic		473,558		479,588		496,993
Weighted average effect of dilutive shares (1)(2)(3)		—		—		—
Weighted average number of common shares outstanding—diluted		473,558		479,588		496,993
Income (loss) per share—basic
Loss from continuing operations		$	(3.60)	$	(3.16)	$	(1.12)
Income (loss) from discontinued operations		(2.21)		0.75		(0.16)
Net loss attributable to common stockholders per common share—basic		$	(5.81)	$	(2.41)	$	(1.28)
Income (loss) per share—diluted
Loss from continuing operations		$	(3.60)	$	(3.16)	$	(1.12)
Income (loss) from discontinued operations		(2.21)		0.75		(0.16)
Net loss attributable to common stockholders per common share—diluted		$	(5.81)	$	(2.41)	$	(1.28)

__________

(1) For the years ended December 31, 2020, 2019 and 2018, excluded from the calculation of diluted earnings per share is the effect of adding back $29.9 million, $28.2 million and $28.6 million of interest expense, respectively, and 87,478,400, 38,112,100, and 38,112,100 of weighted average dilutive common share equivalents, respectively, for the assumed conversion or exchange of the Company's outstanding convertible and exchangeable notes, as their inclusion would be antidilutive.

(2) The calculation of diluted earnings per share excludes the effect of weighted average unvested non-participating restricted shares of 74,100 and 571,500 for the years ended December 31, 2019 and 2018 , respectively, as the effect would be antidilutive. No unvested non-participating restricted shares were outstanding during the year ended December 31, 2020. The calculation of diluted earnings per share also excludes the effect of weighted average shares of class A common stock that are contingently issuable in relation to performance stock units (Note 19) of 5,776,800, 990,700 and 532,900 for the years ended December 31, 2020, 2019 and 2018, respectively. Also excluded from the calculation of diluted earnings per share is the effect of weighted average shares of class A common stock that are issuable to net settle the exercise of warrants (Note 15) of 862,200 for the year ended December 31, 2020 as the effect would be antidilutive.

(3) OP Units, subject to lock-up agreements, may be redeemed for registered or unregistered class A common stock on a one-for-one basis. At December 31, 2020, 2019 and 2018 there were 51,076,700, 53,261,100 and 31,358,500 redeemable OP Units, respectively. These OP Units would not be dilutive and were not included in the computation of diluted earnings per share for all periods presented.

18. Fee Income

The Company's real estate investment management platform manages capital on behalf of institutional and retail investors in private funds, traded and non-traded REITs, and other investment vehicles for which the Company earns fee income. For investment vehicles in which the Company co-sponsors with a third party or for which the Company engages a third party sub-advisor, such fee income is shared with the respective co-sponsor or sub-advisor.

Fee income in 2019 and 2018, as presented below, excludes management fees from the Company's open-end light industrial fund, which is included in income from discontinued operations (Note 16) prior to the sale of the Company's light industrial platform in December 2019.

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The Company earns fee income from the following sources:


	Year Ended December 31,
(In thousands)		2020		2019		2018
Institutional funds and other investment vehicles		$	129,086	$	82,188	$	48,624
Public companies (CLNC, and NRE prior to its sale in September 2019)		29,739		118,049		65,258
Non-traded REIT		17,170		19,896		29,597
Other		1,760		3,782		964
		$	177,755	$	223,915	$	144,443

The following table presents the Company's fee income by type:


	Year Ended December 31,
(In thousands)		2020		2019		2018
Base management fees ($169,518, $151,452 and $130,384 from affiliates, respectively)		$	169,813	$	152,189	$	131,406
Asset management fees ($2,430, $2,371 and $2,078 from affiliates, respectively)		3,273		3,559		2,078
Acquisition and disposition fees—from affiliates		—		—		1,922
Incentive and termination fees—from affiliates ($35, $64,555, and $5,445 from affiliates, respectively)		35		64,555		5,445
Other fee income ($4,541, $2,206 and $3,389 from affiliates, respectively)		4,634		3,612		3,592
Total fee income		$	177,755	$	223,915	$	144,443

Base Management Fees—The Company earns base management fees for the day-to-day operations and administration of its managed private funds, traded and non-traded REITs, and other investment vehicles, calculated as follows:

•Private Funds and similar investment vehicles—generally (a) 1% per annum of limited partners' net funded capital, or (b) 0.9% to 1.75% per annum of investors' committed capital during commitment or investment period and thereafter, of contributed or invested capital;

•CLNC—1.5% per annum of CLNC's stockholders' equity (as defined in its management agreement), with a reduction in fee base to reflect CLNC's reduced book value effective in the beginning of the fourth quarter of 2019;

•Non-Traded REIT—1.5% per annum of most recently published NAV (as may be subsequently adjusted for any special distribution) for NorthStar Healthcare, and prior to closing of the Combination on January 31, 2018, 1% to 1.25% per annum of gross assets for NorthStar I and NorthStar II. $2.5 million per quarter of base management fee for NorthStar Healthcare is paid in shares of NorthStar Healthcare common stock at a price per share equal to its most recently published NAV per share (as may be subsequently adjusted for any special distribution); and

•NorthStar Realty Europe ("NRE")—prior to the September 30, 2019 sale of NRE, previously a publicly-traded REIT managed by the Company, and concurrent termination of its management contract, a variable fee of 1.5% per annum of NRE's reported European Public Real Estate Association NAV ("EPRA NAV" as defined in its management agreement) for EPRA NAV up to and including $2.0 billion, and 1.25% per annum for EPRA NAV amounts exceeding $2.0 billion.

Asset Management Fees—The Company earns asset management fees from its managed private funds, which represents a one-time fee upon closing of each investment, calculated as a fixed percentage, generally 0.5% of the limited partners' net funded capital on each investment.

Acquisition and Disposition Fees—Prior to closing of the Combination on January 31, 2018, the Company earned

from NorthStar I and NorthStar II an acquisition fee of 1% of the amount funded or allocated to originate or acquire an investment, and a disposition fee of 1% to 2% of the contractual sales price for disposition of an investment.

Incentive Fees—The Company may earn incentive fees from CLNC, and prior to its termination, from NRE, determined based on the performance of the investment vehicles subject to the achievement of minimum return hurdles in accordance with the terms set out in their respective governing agreements. A portion of the incentive fees earned by the Company (generally 40% to 50%) is allocable to senior management, investment professionals and certain other employees of the Company, included in carried interest and incentive fee compensation expense. There were no incentive fees earned in 2020.

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Termination of the NRE management contract in September 2019 resulted in payment and recognition of a termination fee to the Company of $64.6 million, of which $21.5 million represents incentive fees earned for fiscal year 2019 through the date of termination.

Other Fee Income—Other fees include service fees for information technology and operational support services and facilities to portfolio companies, advisory fees, and licensing fee on the Company's proprietary real estate index, a rules-based strategy that invests in common stock of U.S. REITs.

19. Equity-Based Compensation

The Colony Capital, Inc. 2014 Omnibus Stock Incentive Plan (the "Equity Incentive Plan") provides for the grant of restricted stock, performance stock units ("PSUs"), Long Term Incentive Plan ("LTIP") units, restricted stock units ("RSUs"), deferred stock units ("DSUs"), options, warrants or rights to purchase shares of the Company's common stock, cash incentives and other equity-based awards to the Company's officers, directors (including non-employee directors), employees, co-employees, consultants or advisors of the Company or of any parent or subsidiary who provides services to the Company. Shares reserved for the issuance of awards under the Equity Incentive Plan are subject to equitable adjustment upon the occurrence of certain corporate events, provided that this number automatically increases each January 1st by 2% of the outstanding number of shares of the Company’s class A common stock on the immediately preceding December 31st. At December 31, 2020, an aggregate 64.1 million shares of the Company's class A common stock were reserved for the issuance of awards under the Equity Incentive Plan.

Restricted Stock—Restricted stock awards relating to the Company's class A common stock are granted to senior executives, directors and certain employees, with a service condition only and are generally subject to annual time-based vesting in equal tranches over a three-year period. Restricted stock is entitled to dividends declared and paid on the Company's class A common stock and such dividends are not forfeitable prior to vesting of the award. Restricted stock awards are valued based on the Company's class A common stock price on grant date and equity-based compensation expense is recognized on a straight-line basis over the requisite three-year service period.

Restricted Stock Units ("RSUs")—RSUs relating to the Company's class A common stock are subject to a performance condition. Vesting of performance-based RSUs occur upon achievement of certain Company-specific metrics over a performance measurement period. Only vested RSUs are entitled to accrued dividends declared and paid on the Company's class A common stock during the time period the RSUs were outstanding. Fair value of RSUs are based on the Company's class A common stock price on grant date. Equity-based compensation expense is recognized when it becomes probable that the performance condition will be met.

Performance Stock Units ("PSUs")—PSUs are granted to senior executives and certain employees, and are subject to both a service condition and market condition. Following the end of the measurement period for the PSUs, the recipients of PSUs who remain employed will vest in, and be issued a number of shares of the Company's class A common stock, generally ranging from 0% to 200% of the number of PSUs granted, to be determined based upon the performance of the Company's class A common stock either relative to that of a specified peer group or against a target stock price over a three-year measurement period (such measurement metric the "total shareholder return"). In addition, recipients of PSUs whose employment is terminated after the first anniversary of the PSU grant are eligible to vest in a portion of the PSU award following the end of the measurement period based on achievement of the total shareholder return metric otherwise applicable to the award. PSUs also contain dividend equivalent rights which entitle the recipients to a payment equal to the amount of dividends that would have been paid on the shares that are ultimately issued at the end of the measurement period.

Fair value of PSUs, including dividend equivalent rights, was determined using a Monte Carlo simulation under a risk-neutral premise, with the following assumptions:


	2020 PSU Grants	2019 PSU Grants	2018 PSU Grant (4)
Expected volatility of the Company's class A common stock (1)	34.1%	26.2%	29.0%
Expected annual dividend yield (2)	9.3%	8.5% - 8.7%	7.3%
Risk-free rate (per annum) (3)	0.4%	2.2% - 2.4%	2.1%

__________

(1) Based upon the Company's historical stock volatility or in combination with historical stock volatility of a specified peer group, or a combination of historical volatility and implied volatility on actively traded stock options of a specified peer group.

(2) Based upon a combination of historical dividend yields and current annualized dividends.

(3) Based upon the continuously compounded zero-coupon U.S. Treasury yield for the term coinciding with the remaining measurement period of the award as of valuation date.

(4) Reflects assumptions applied in valuing the award upon modification in February 2019.

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Fair value of PSU awards, excluding dividend equivalent rights, is recognized on a straight-line basis over their measurement period as compensation expense, and is not subject to reversal even if the market condition is not achieved. The dividend equivalent right is accounted for as a liability-classified award. The fair value of the dividend equivalent right is recognized as compensation expense on a straight-line basis over the measurement period, and is subject to adjustment to fair value at each reporting period.

LTIP Units—LTIP units are units in the Operating Company that are designated as profits interests for federal income tax purposes. Unvested LTIP units that are subject to market conditions do not accrue distributions. Each vested LTIP unit is convertible, at the election of the holder (subject to capital account limitation), into one common OP Unit and upon conversion, subject to the redemption terms of OP Units (Note 15).

LTIP units issued have either (1) a service condition only, valued based upon the Company's class A common stock price on grant date; or (2) both a service condition and a market condition based upon the Company's class A common stock achieving target prices over predetermined measurement periods subject to continuous employment to the time of vesting, valued using a Monte Carlo simulation.

The following assumptions were applied in the Monte Carlo model under a risk-neutral premise:


	2020 LTIP Grant	2019 LTIP Grant (1)
Expected volatility of the Company's class A common stock (2)	43.1%	28.3%
Expected dividend yield (3)	0.0%	8.1%
Risk-free rate (per annum) (4)	0.2%	1.8%

__________

(1) Represents 10 million LTIP units granted to Marc Ganzi in connection with the acquisition of DBH in July 2019, with vesting based upon achievement of the Company's class A common stock price closing at or above $10.00 over any 90 consecutive trading days prior to the fifth anniversary of the grant date.

(2) Based upon historical volatility of the Company's stock and those of a specified peer group.

(3) Based upon the Company's most recently issued dividend prior to grant date and closing price of the Company's class A common stock on grant date. Expected dividend yield is zero for the 2020 LTIP award as the Company suspended common dividends beginning with the second quarter of 2020.

(4) Based upon the continuously compounded zero-coupon US Treasury yield for the term coinciding with the measurement period of the award as of valuation date.

Equity-based compensation cost on LTIP units is recognized on a straight-line basis either over (1) the service period for awards with a service condition only; or (2) the derived service period for awards with both a service condition and a market condition, irrespective of whether the market condition is satisfied. The derived service period is a service period that is inferred from the application of the simulation technique used in the valuation of the award, and represents the median of the terms in the simulation in which the market condition is satisfied.

Deferred Stock Units—Certain non-employee directors may elect to defer the receipt of annual base fees and/or restricted stock awards, and in lieu, receive awards of DSUs. DSUs awarded in lieu of annual base fees are fully vested on their grant date, while DSUs awarded in lieu of restricted stock awards vest one year from their grant date. DSUs are entitled to a dividend equivalent, in the form of additional DSUs based on dividends declared and paid on the Company's class A common stock. Any such additional DSUs will also be credited with additional DSUs as cash dividends are paid, subject to the same restrictions and vesting conditions, where applicable. Upon separation of service from the Company, vested DSUs will be settled in shares of the Company’s class A common stock. Fair value of DSUs are determined based on the price of the Company's class A common stock on grant date and recognized immediately if fully vested upon grant, or on a straight-line basis over the vesting period as equity based compensation expense and equity.

Equity-based compensation expense, excluding amounts related to the industrial and hotel businesses which are presented as discontinued operations (Note 16), is as follows:


	Year Ended December 31,
(In thousands)		2020		2019		2018
Compensation expense (including $568, $345 and $270 amortization of fair value of dividend equivalent rights)		$	34,156	$	29,899	$	37,839

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Changes in the Company’s unvested equity awards are summarized below:


							Weighted Average Grant Date Fair Value
	Restricted Stock	LTIP Units (1)	DSUs	RSUs (2)	PSUs (3)	Total	PSUs		All Other Awards
Unvested shares and units at December 31, 2019	7,641,708	10,000,000	265,784	—	5,680,195	23,587,687	$	3.66	$	3.25
Granted	10,130,282	1,845,018	672,910	10,799,244	4,324,375	27,771,829	1.64		2.20
Vested	(6,426,591)	—	(613,817)	—	—	(7,040,408)	—		4.96
Forfeited	(616,687)	—	—	(1,209,680)	(68,679)	(1,895,046)	3.71		3.74
Unvested shares and units at December 31, 2020	10,728,712	11,845,018	324,877	9,589,564	9,935,891	42,424,062	2.78		2.10

__________

(1) Represents the number of LTIP units granted subject to vesting based upon achievement of market condition. LTIP units that do not meet the market condition within the measurement period will be forfeited.

(2) Represents the number of RSUs granted that are subject to vesting only upon achievement of performance condition. RSUs that do not meet the performance condition at the end of the measurement period will be forfeited.

(3) Represents the number of PSUs granted, which does not reflect potential increases or decreases that could result from the final outcome of the total shareholder return measured at the end of the performance period.

Fair value of equity awards that vested, determined based on their respective fair values at vesting date, was $17.9 million in 2020, $14.7 million in 2019 and $111.2 million in 2018.

At December 31, 2020, aggregate unrecognized compensation cost for all unvested equity awards was $57.2 million, which is expected to be recognized over a weighted average period of 2.5 years.

Awards Granted by Managed Companies

CLNC and NRE, both managed by the Company prior to termination of NRE's management agreement concurrent with the sale of NRE in September 2019, issued restricted stock and performance stock units to the Company and certain of the Company's employees (collectively, "managed company awards"). CLNC awards are primarily restricted stock grants that typically vest over a three-year period, subject to service conditions. NRE awards generally had similar terms as the Company's stock awards, except that the NRE performance stock units measured NRE's stock performance against either an absolute total shareholder return threshold or relative to the performance of a specified market index. Employees were entitled to receive shares of NRE common stock if service conditions and/or market conditions were met. Generally, the Company grants the managed company awards that it receives in its capacity as manager to its employees with substantially the same terms and service requirements. Such grants are made at the discretion of the Company, and the Company may consult with the board of directors or compensation committees of the respective managed companies as to final allocation of awards to its employees.

Managed company awards granted to the Company, pending grant by the Company to its employees, are recognized based upon their fair value at grant date as other assets and other liabilities on the consolidated balance sheet. The deferred revenue liability is amortized into other income as the awards vest to the Company.

Managed company awards granted to employees, either directly or through the Company, are recorded as other asset and other liability, and amortized on a straight-line basis as equity-based compensation expense and as other income, respectively, as the awards vest to the employees. The other asset and other liability associated with managed company awards granted to employees are subject to adjustment to fair value at each reporting period, with changes reflected in equity-based compensation and other income, respectively.

Equity-based compensation expense recognized related to managed company awards was $2.1 million in 2020, $32.3 million in 2019 and $9.6 million in 2018. A corresponding amount is recognized in other income for managed company awards granted to employees (Note 20). At December 31, 2020, aggregate unrecognized compensation cost for unvested managed company awards of CLNC was $2.3 million, which is expected to be recognized over a weighted average period of 1 year.

20. Transactions with Affiliates

Affiliates include (i) private funds, traded and non-traded REITs and other investment vehicles that the Company manages or sponsors, and in which the Company may have an equity interest or co-invests with; (ii) the Company's investments in unconsolidated ventures; and (iii) directors, senior executives and employees of the Company (collectively, "employees").

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Amounts due from and due to affiliates consist of the following:


(In thousands)	December 31, 2020		December 31, 2019
Due from Affiliates
Investment vehicles, portfolio companies and unconsolidated ventures
Fee income	$	32,259	$	36,106
Cost reimbursements and recoverable expenses	15,655		14,624
Loan and interest receivable	35,089		—
Employees and other affiliates	541		750
	$	83,544	$	51,480
Due to Affiliates

Employees and other affiliates	$	601	$	34,064

Transactions with affiliates include the following:

Fee Income—Fee income earned from investment vehicles that the Company manages and/or sponsors, and may have an equity interest or co-investment, are presented in Note 18.

Cost Reimbursements—The Company received cost reimbursement income related primarily to the following arrangements:

•Direct and indirect operating costs, including but not limited to compensation, overhead and other administrative costs, for managing the operations of non-traded REITs and CLNC, with reimbursements for non-traded REITs limited to the greater of 2% of average invested assets or 25% of net income (net of base management fees);

•Direct costs of personnel dedicated solely to NRE (prior to termination of management agreement concurrent with sale of NRE in September 2019) plus 20% of such personnel costs for related overhead charges, not to exceed, in aggregate, specified thresholds as set out in the NRE management agreement;

•Costs incurred in performing investment due diligence for NorthStar Healthcare and private funds managed by the Company;

•Equity awards granted to employees of the Company by CLNC and NRE (prior to termination of the NRE management agreement), which are presented gross as other income and compensation expense (Note 19);

•Services provided to the Company's unconsolidated investment ventures for servicing and managing their loan portfolios, including foreclosed properties, and services to the Digital Colony Manager joint venture prior to the Company's acquisition of DBH in July 2019; and

•Administrative services provided to certain senior executives of the Company.

Cost reimbursements, included in other income, are as follows. Amounts related to NRE pertain to periods prior to termination of its management agreement in September 2019.


	Year Ended December 31,
(In thousands)		2020		2019		2018
Retail companies		$	3,513	$	3,098	$	4,672
Public companies (CLNC, NRE)		8,974		14,442		10,747
Private investment vehicles and other		9,392		14,059		9,198
Equity awards of CLNC and NRE (Note 19)		1,976		32,627		10,078
		$	23,855	$	64,226	$	34,695

Recoverable Expenses—The Company pays organization and offering costs associated with the formation and capital raising of investment vehicles sponsored by the Company, for which the Company recovers from these investment vehicles up to specified thresholds, as applicable.

NorthStar Healthcare Credit Facility—The Company has committed to provide NorthStar Healthcare with an unsecured revolving credit facility at market terms with a maximum principal amount of $35.0 million. The credit facility matures in December 2022, with a six-month extension option. Advances under the credit facility accrue interest at LIBOR plus 3.5%. There is no commitment fee for the unused portion of the facility. The credit facility is intended to provide additional liquidity to NorthStar Healthcare on an as needed basis. In April 2020, the credit facility was drawn for the full amount of $35.0 million and remained outstanding at December 31, 2020. There were no amounts outstanding at December 31, 2019.

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Liquidating Trust—In the formation of CLNC through a merger with NorthStar I and NorthStar II, non-traded REITs previously sponsored by the Company, a certain loan receivable previously held by NorthStar I was not transferred to CLNC, for which the Company acquired a senior participation interest at par, and the remaining junior participation interest ("NorthStar I Retained Asset") was transferred to a liquidating trust. The Company entered into a management services agreement with the liquidating trust to service and assist in the potential sale of the NorthStar I Retained Asset, and to provide administrative services on such terms and conditions as approved by the trustees for a management fee of 1.25% per annum of the net assets of the liquidating trust. Such fee amount is immaterial. In October 2020, the loan was paid off at a discount and the liquidating trust was liquidated and dissolved in November 2020.

Deferred Consideration—In the acquisition of DBH in July 2019 (Note 3), payment of a portion of the cash consideration to the principals of DBH, including Marc Ganzi, who became employees or affiliate of the Company post-acquisition, was deferred until the expiration of certain customary seller indemnification obligations. The entire deferred consideration of $32.5 million was paid in May 2020.

Digital Real Estate Acquisitions—In connection with the acquisition of third party interests in DataBank in December 2019 (Note 3), Marc Ganzi and Ben Jenkins entered into voting agreements with the Company, which provided the Company with majority voting power over DataBank's board of directors. Additionally, in exchange for incentive units owned by Messrs. Ganzi and Jenkins allocable to the DataBank stake acquired by the Company, the Company issued OP Units with a value of $3 million, which are subject to a multi-year lockup. The value represents consideration paid to Messrs. Ganzi and Jenkins by the Company for such incentive units in connection with its investment in DataBank, which was in addition to the cash consideration paid to third parties by the Company for its acquired interests in DataBank. As a result, the Company will not be subject to future carried interest payments to Messrs. Ganzi and Jenkins with respect to the Company's investment in DataBank.

In connection with acquisition of Vantage SDC in July 2020 (Note 3), the Company entered into a series of agreements with Messrs. Ganzi and Jenkins, and their respective affiliates, pursuant to which Messrs. Ganzi and Jenkins invested $8.7 million and $2.1 million, respectively, in Vantage SDC alongside the Company and the co-investors on the same economic terms. Such amounts invested represented 40% of carried interest payments received by each of Messrs. Ganzi and Jenkins in connection with Vantage SDC acquisition as a result of their respective personal investments in Vantage made prior to the Company’s acquisition of DBH (such carried interest was determined excluding any additional future payments that may be payable if certain leasing milestones are achieved). Additionally, the day-to-day operations of Vantage SDC will continue to be managed by the existing management company of Vantage, in which Messrs. Ganzi and Jenkins own a 50% interest in the aggregate. Fees paid to the Vantage management company for Vantage SDC was $5.4 million for 2020.

In December 2020, DataBank acquired the zColo colocation business from Zayo, which is a portfolio company of DCP I and other co-invest vehicles sponsored and managed by the Company.

In the aforementioned transactions, the Company took a series of steps to mitigate conflicts in the transactions, including receiving fairness opinions on the purchase price from a nationally recognized third party valuation firm. Additionally, the transactions, specifically the related party aspects of the transactions, were subject to the approval of either the Company's board of directors or the audit committee of the board of directors.

Arrangements with Company-Sponsored Private Funds—The Company co-invests alongside its sponsored private funds through joint ventures between the Company and the sponsored private fund. These co-investment joint ventures are consolidated by the Company. The Company has capital commitments, as general partner, directly into the private funds and as an affiliate of the general partner, capital commitments satisfied through co-investment joint ventures. In connection with the Company's commitments as an affiliate of the general partner, the Company is allocated a proportionate share of the costs of the private funds such as financing and administrative costs. Such costs expensed in the three years presented were immaterial and relate primarily to the Company's share of the fund's operating costs and deferred financing costs on borrowings of the fund.

Equity Awards of CLNC and NRE—As discussed in Note 19, CLNC and NRE (prior to termination of the NRE management agreement) grant equity awards to the Company and certain of the Company's employees, either directly or indirectly through the Company, are recognized as a gross-up of equity-based compensation expense over the vesting period with a corresponding amount in other income.

Investment in Managed Investment Vehicles—Subject to the Company's related party policies and procedures, senior management, investment professionals and certain other employees may invest on a discretionary basis in investment vehicles sponsored by the Company, either directly in the vehicle or indirectly through the general partner entity. These investments are generally not subject to management fees, but otherwise bear their proportionate share of other operating expenses of the investment vehicles. At December 31, 2020 and 2019, such investments in consolidated investment vehicles and general partner entities totaled $19.1 million and $4.0 million, respectively, reflected in

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redeemable noncontrolling interests and noncontrolling interests on the balance sheet. Their share of net income was $9.5 million in 2020, $2.5 million in 2019 and $0.4 million in 2018.

Aircraft—The Company, through its subsidiary, Colony Capital Advisors, LLC, has entered into a time sharing agreement with Thomas J. Barrack, Jr., the Company's Executive Chairman, under which Mr. Barrack may use the Company’s aircraft for personal travel. Under this arrangement, Mr. Barrack pays the Company for personal usage based on the incremental cost to the Company, including direct and indirect variable costs, but in no case more than the maximum reimbursement permitted by the Federal Aviation Regulations under the agreement. Mr. Barrack reimbursed the Company $0.7 million in 2020, $1.4 million in 2019 and $0.7 million in 2018. The Company's aircraft was sold in January 2021.

Separately, pursuant to Mr. Ganzi’s employment agreement, as amended, the Company has agreed to reimburse Mr. Ganzi for certain variable operational costs of business travel on a chartered or private jet (including any aircraft that Mr. Ganzi may partially or fully own); provided that the Company will not reimburse the allocable share (based on the number of passengers) of variable operational costs for any passenger on such flight who is not traveling on Company business. Additionally, the Company has also agreed to reimburse Mr. Ganzi for certain defined fixed costs of any aircraft owned by Mr. Ganzi. The fixed cost reimbursements will be made based on an allocable portion of an aircraft’s annual budgeted cash fixed operating costs, based on the number of hours the aircraft will be used for business purposes. At least once a year, the Company will reconcile the budgeted fixed operating costs with the actual fixed operating costs of the aircraft, and the Company or Mr. Ganzi, as applicable, will make a true-up payment for any difference. The Company reimbursed Mr. Ganzi $1.8 million in 2020 and $0.3 million in 2019, respectively.

21. Income Taxes

The Company is subject to income tax laws of the various jurisdictions in which it operates, including U.S. federal, state and local and non-U.S. jurisdictions, primarily in Europe. The Company's current primary sources of income subject to tax are income from its investment management business, operations of its hotel and healthcare portfolios as well as real estate and loan investments in Europe.

Income Tax Benefit (Expense)

The components of current and deferred tax benefit (expense), excluding amounts related to the hotel and industrial businesses presented as discontinued operations (Note 16), are as follows.


	Year Ended December 31,
(In thousands)	2020		2019		2018
Current
Federal	$	(20,173)	$	(5,957)	$	4,995
State and local	(397)		(2,859)		1,736
Foreign	1,252		(12,459)		(13,698)
Total current tax benefit (expense)	(19,318)		(21,275)		(6,967)
Deferred
Federal	33,238		(137)		53,991
State and local	5,784		2,286		(68)
Foreign	(9,665)		5,150		3,148
Total deferred tax benefit (expense)	29,357		7,299		57,071
Income tax benefit (expense) on continuing operations	$	10,039	$	(13,976)	$	50,104

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Deferred Income Tax Assets and Liabilities

Deferred tax assets are included in other assets, which excludes $4.8 million and $12.6 million related to assets held for disposition at December 31, 2020 and 2019, respectively. Deferred tax liabilities are included in accrued and other liabilities.

The components of deferred tax assets, excluding amounts related to the hotel business that is held for disposition, and deferred tax liabilities arising from temporary differences are as follows.


(In thousands)	December 31, 2020		December 31, 2019
Deferred tax assets
Net operating and capital loss carry forwards (1)	$	100,684	$	54,372
Equity-based compensation	12,909		23,410

Real estate, leases and related intangible liabilities	110,546		12,731

Straight-line and prepaid rent	9,674		3,520
Deferred income	1,121		5,816
Deferred interest expense	21,664		11,462
Lease liability—corporate offices	10,385		6,270
Other	178		390
Gross deferred tax assets	267,161		117,971
Valuation allowance	(84,799)		(20,565)
Deferred tax assets, net of valuation allowance	182,362		97,406
Deferred tax liabilities
Real estate, leases and related intangible assets	275,844		209,474
Investment in partnerships	9,739		1,051
Other intangible assets	17,277		31,124
ROU lease asset—corporate offices	5,208		9,420


Gross deferred tax liabilities	308,068		251,069
Net deferred tax liability	$	(125,706)	$	(153,663)

__________

(1) At December 31, 2020 and 2019, deferred tax assets were recognized on NOL (prior to establishment of valuation allowances) of $385.9 million and $217.5 million, respectively (excluding NOL, prior to establishment of valuation allowances, of $157.6 million and $52.2 million, respectively, related to the hotel business that is held for disposition). NOL attributable to U.S. federal and state generally begin to expire in 2031, except those U.S federal and foreign losses incurred after December 31, 2017 which can generally be carried forward indefinitely.

Valuation Allowance—Of the valuation allowance of $84.8 million at December 31, 2020, $64.2 million of the allowance was established during 2020, primarily driven by uncertainties in future realization of tax benefit on NOL and taking into consideration decreases in value of the underlying real estate assets. This excludes valuation allowance of $47.1 million at December 31, 2020 on deferred tax assets associated with the hotel business that is held for disposition, of which $41.3 million of the allowance was established during 2020.

Effect of CARES Act—The Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted on March 27, 2020. Among other things, the CARES Act temporarily removed the 80% limitation on the amount of taxable income that can be offset with NOL for 2019 and 2020, and allowed for a carryback of NOL generated in years 2018 through 2020 to the five preceding taxable years of the loss. The Company has approximately $76.2 million of NOL available for carryback under the CARES Act and recorded $3.6 million of income tax benefit to reflect the carryback. The Company also reclassified $17.9 million of deferred tax asset to current tax receivable as of December 31, 2020, which reflects refunds received or expected to be received in the next twelve months. These amounts exclude $16.7 million of carryback NOL, $2.0 million of income tax benefit recorded and $5.6 million of deferred tax asset reclassified to current tax in connection with the hotel business that is held for disposition.

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Effective Income Tax

The Company's income tax benefit (expense) attributable to continuing operations varied from the amount computed by applying the statutory income tax rate to loss from continuing operations before income taxes. A reconciliation of the statutory U.S. income tax to the Company's effective income tax attributable to continuing operations is presented as follows:


	Year Ended December 31,
(Amounts in thousands)	2020		2019		2018
Loss from continuing operations before income taxes	$	(2,474,276)	$	(1,504,376)	$	(468,067)
(Income) loss from continuing operations before income taxes attributable to pass-through subsidiaries	1,569,819		704,418		230,462
Loss from continuing operations before income taxes attributable to taxable subsidiaries	(904,457)		(799,958)		(237,605)
Federal tax benefit at statutory tax rate (at 21%)	189,936		167,991		49,897
State and local income taxes, net of federal income tax benefit	1,437		862		10,601
Foreign income tax differential	(4,632)		(8,979)		(3,533)
Foreign income tax differential—U.K. tax rate change	17,591		—		—
Nondeductible expenses—goodwill impairment	(124,740)		(165,480)		—
Nondeductible expenses—other	(1,300)		(4,556)		(3,749)
Valuation allowance, net	(64,234)		(4,151)		(7,789)
Impact of Tax Cuts and Jobs Act	—		—		2,092
Other	(4,019)		337		2,585
Income tax benefit (expense) on continuing operations	$	10,039	$	(13,976)	$	50,104

Tax Examinations

The Company is no longer subject to new income tax examinations by tax authorities for years prior to 2017.

22. Commitments and Contingencies

Leases

As lessee, the Company's leasing arrangements are composed of (i) leases on investment properties, consisting primarily of finance and operating leases on powered shell spaces for data centers, an air rights operating lease, lease on data center equipment, and operating ground leases; and (ii) operating leases for corporate offices.

The weighted average remaining lease term based upon outstanding lease liability balances at December 31, 2020 was 12.4 years for finance leases on investment properties, 13.2 years for operating leases on investment properties and 6.4 years for operating leases on corporate offices.

For the year ended December 31, 2018, operating lease cost, including variable lease expense, was $3.8 million for ground leases and $10.1 million for office leases.

The following table summarizes total lease cost for operating leases and finance leases for the years ended December 31, 2020 and 2019. There were no finance leases in 2019.


	Year Ended December 31, 2020				Year Ended December 31, 2019
(In thousands)	Investment Properties		Corporate Offices		Investment Properties		Corporate Offices
Operating leases: (1)
Fixed lease expense	$	23,551	$	10,102	$	3,778	$	9,213
Variable lease expense	5,758		2,506		133		2,516
Total operating lease cost	$	29,309	$	12,608	$	3,911	$	11,729

Finance leases:
Interest expense	$	414	$	—	$	—	$	—
Amortization of ROU lease asset	475		—		—		—
Total finance lease cost	$	889	$	—	$	—	$	—

__________

(1) Total lease cost for operating leases is included in property operating expense for investment properties and administrative expense for corporate offices.

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Lease Commitments

Finance and operating lease liabilities take into consideration renewal or termination options when such options are deemed reasonably certain to be exercised by the Company and exclude variable lease payments which are expensed as incurred. The Company makes variable lease payments for: (i) leases with rental payments that are adjusted periodically for inflation or increases in property fair value, and/or (ii) nonlease services, such as common area maintenance in net leases and operating expenses, primarily for power, in data center leases.

The table below presents the Company's future lease commitments at December 31, 2020, determined using weighted average discount rates of 6.2% for finance leases on investment properties, 6.3% for operating leases on investment properties, excluding properties held for disposition, and 4.6% for operating leases on corporate offices:


(In thousands)	Finance Leases		Operating Leases
Year Ending December 31,	Investment Properties		Investment Properties		Corporate Offices
2021	$	15,315	$	55,806	$	10,401
2022	15,644		56,161		9,307
2023	15,918		57,409		8,490
2024	16,308		53,019		8,951
2025	16,709		41,640		7,975
2026 and thereafter	136,669		326,947		15,045
Total lease payments	216,563		590,982		60,169
Present value discount	(67,589)		(239,462)		(8,636)
Finance / Operating lease liability (Note 9)	$	148,974	$	351,520	$	51,533

Litigation

The Company may be involved in litigations in the ordinary course of business. As of December 31, 2020, the Company was not involved in any legal proceedings that are expected to have a material adverse effect on the Company’s results of operations, financial position or liquidity.

23. Segment Reporting

The Company conducts its business through five reportable segments as follows:

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•Other—This segment is composed of other equity and debt ("OED") investments and the non-digital investment management ("Other IM") business. OED encompasses a diversified group of non-digital real estate and real estate-related equity and debt investments, including investments for which the Company acts as a general partner and/or manager ("GP co-investments") and receives various forms of investment management economics on related third-party capital on such investments, which includes our investment in CLNC, among other holdings. The Company has monetized a substantial portion of its OED portfolio and will continue to monetize the remainder as it completes its digital evolution. Other IM, which is separate from Digital IM, encompasses the Company’s management of private real estate credit funds and related co-investment vehicles, CLNC, and NorthStar Healthcare. Many of the investments underlying these vehicles are co-owned by the Company’s balance sheet and categorized under OED. The Company earns management fees, generally based on the amount of assets or capital managed, and contractual incentive fees or potential carried interest based on the performance of the investment vehicles managed subject to achievement of minimum return hurdles.

Amounts not allocated to specific segments generally include corporate level cash and corresponding interest income, fixed assets for administrative use, corporate level financing and related interest expense, income and expense related to cost reimbursement arrangements with certain affiliates, costs in connection with unconsummated investments, compensation expense not directly attributable to reportable segments, corporate level administrative and overhead costs as well as corporate level transaction costs. Costs which are directly attributable, or otherwise can be subjected to a reasonable and systematic allocation, have been allocated to each of the reportable segments. In the third quarter of 2020, the Company applied a more specific identification of individual compensation and administrative costs to more precisely attribute these costs to the respective reportable segments. The more refined cost attribution methodology is a better reflection of the underlying cost of operations of the individual reportable segments and was retrospectively applied to prior periods.

Aligned with the Company's acceleration of its digital transformation, the Company disaggregated its digital operating segments and beginning the third quarter of 2020, presents three digital reportable segments, as described further below. Concurrently, the Company aggregated three of its non-digital operating segments, that is CLNC, OED and Other IM, and presents a single reportable segment, renamed as Other. These changes reflect the different business strategies for the various digital operating segments and collectively, for the non-digital operating segments, and also reflect the Company's focus on its digital business which represents the future growth of the Company.

Additionally, effective the first and third quarters of 2020, the Industrial segment and the Hospitality segment, respectively, no longer constitute reportable segments. In December 2019, the Company completed the sale of the light industrial portfolio and its related management platform, which represented the vast majority of the industrial segment. The remaining bulk industrial portfolio was sold in December 2020. In September 2020, the Company entered into a definitive agreement to sell five of the six hotel portfolios in its Hospitality segment (remaining portfolio is in receivership) and the THL Hotel Portfolio in the Other segment. Current and prior period results of the Industrial segment, Hospitality segment and THL Hotel Portfolio in the Other segment are presented as discontinued operations on the consolidated statements of operations (Note 16).

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Segment Results of Operations

The following table presents results of operations of the Company's reportable segments.


(In thousands)	Digital Operating		Digital Investment Management		Digital Other		Wellness Infrastructure		Other		Amounts Not Allocated to Segments		Total















Year Ended December 31, 2020
Total revenues	$	313,283	$	84,420	$	4,160	$	527,176	$	293,538	$	14,017	$	1,236,594
Income (loss) from continuing operations	(130,818)		9,793		35,922		(754,709)		(1,373,552)		(250,873)		(2,464,237)
Income (loss) from continuing operations attributable to Colony Capital, Inc.	(19,784)		9,196		23,261		(503,925)		(916,861)		(218,636)		(1,626,749)
Loss from discontinued operations attributable to Colony Capital, Inc.													(1,049,010)
Net loss attributable to Colony Capital, Inc.													$	(2,675,759)

Year Ended December 31, 2019
Total revenues	$	6,039	$	34,368	$	—	$	582,139	$	570,042	$	14,235	$	1,206,823
Income (loss) from continuing operations	(691)		48,942		(4,465)		(243,688)		(880,972)		(437,478)		(1,518,352)
Income (loss) from continuing operations attributable to Colony Capital, Inc.	(124)		44,808		(4,026)		(183,510)		(869,453)		(397,352)		(1,409,657)
Income from discontinued operations attributable to Colony Capital, Inc.													360,850
Net loss attributable to Colony Capital, Inc.													$	(1,048,807)

Year Ended December 31, 2018
Total revenues	$	—	$	—	$	—	$	592,455	$	570,238	$	9,239	$	1,171,932
Income (loss) from continuing operations	—		3,971		1,984		(283,516)		82,572		(222,974)		(417,963)
Income (loss) from continuing operations attributable to Colony Capital, Inc.	—		3,738		1,868		(199,277)		(43,705)		(203,100)		(440,476)
Loss from discontinued operations attributable to Colony Capital, Inc.													(79,131)
Net loss attributable to Colony Capital, Inc.													$	(519,607)

The following table presents selected income and expense items of reportable segments.


(In thousands)	Digital Operating		Digital Investment Management		Digital Other		Wellness Infrastructure		Other		Amounts Not Allocated to Segments		Total



















Year Ended December 31, 2020
Property operating income	$	312,883	$	—	$	45	$	517,186	$	106,046	$	—	$	936,160
Interest income	80		37		1,355		3,936		69,372		5,691		80,471
Fee income	—		83,356		—		—		94,399		—		177,755
Property operating expense	119,729		—		105		249,357		54,525		—		423,716
Interest expense	77,976		—		—		138,182		37,400		56,896		310,454
Depreciation and amortization	210,188		26,056		—		138,312		52,111		4,776		431,443
Impairment loss	—		3,832		—		716,501		732,417		21,247		1,473,997
Gain on sale of real estate	—		—		—		175		25,811		—		25,986
Equity method earnings (losses), including carried interest	—		13,039		22,548		—		(499,453)		—		(463,866)
Income tax benefit (expense)	21,461		(60)		462		(19,718)		7,940		(46)		10,039

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(In thousands)	Digital Operating		Digital Investment Management		Digital Other		Wellness Infrastructure		Other		Amounts Not Allocated to Segments		Total

Year Ended December 31, 2019
Property operating income	$	6,038	$	—	$	—	$	577,669	$	153,657	$	—	$	737,364
Interest income	—		41		—		3,765		159,944		3,015		166,765
Fee income	—		33,095		—		—		190,820		—		223,915
Property operating expense	2,197		—		—		260,374		70,783		—		333,354
Interest expense	1,272		3,230		—		192,621		54,814		54,872		306,809
Depreciation and amortization	1,803		10,406		—		161,115		128,233		6,037		307,594
Impairment loss	—		—		—		187,341		898,540		649		1,086,530
Gain on sale of real estate	—		—		—		1,384		60,619		—		62,003
Equity method earnings (losses), including carried interest	—		7,112		(4,465)		—		(131,349)		—		(128,702)
Income tax benefit (expense)	(10)		(15,094)		—		612		1,170		(654)		(13,976)

Year Ended December 31, 2018
Property operating income	$	—	$	—	$	—	$	586,855	$	180,068	$	—	$	766,923
Interest income	—		—		—		5,138		208,213		1,237		214,588
Fee income	—		—		—		—		144,443		—		144,443
Property operating expense	—		—		—		271,166		74,329		—		345,495
Interest expense	—		—		—		194,898		85,149		54,513		334,560
Depreciation and amortization	—		—		—		164,389		81,385		6,207		251,981
Impairment loss	—		—		—		217,524		282,910		—		500,434
Gain on sale of real estate	—		—		—		—		154,980		—		154,980
Equity method earnings (losses), including carried interest	—		6,861		1,984		—		(8,921)		—		(76)
Income tax benefit (expense)	—		—		—		(4,991)		54,890		205		50,104

Total assets and equity method investments of the reportable segments are summarized as follows:


	December 31, 2020				December 31, 2019
(In thousands)	Total Assets		Equity Method Investments		Total Assets		Equity Method Investments
Digital Operating	$	6,926,634	$	—	$	1,684,867	$	—
Digital Investment Management	490,632		19,167		428,703		1,059
Digital Other	482,464		158,564		46,832		46,832
Wellness Infrastructure	3,914,607		—		4,886,374		—
Other	4,340,736		1,272,769		6,403,002		1,935,882
Amounts not allocated to segments	376,174		3,742		1,120,929		3,742
Assets held for disposition related to discontinued operations	3,669,313		—		5,261,477		—
	$	20,200,560	$	1,454,242	$	19,832,184	$	1,987,515

Geography

Geographic information about the Company's total income and long-lived assets are as follows. Geography is generally presented as the location in which the income producing assets reside or the location in which income generating services are performed.


	Year Ended December 31,
(In thousands)		2020		2019		2018
Total income by geography:
United States		$	1,115,710	$	910,556	$	868,432
Europe		122,475		354,164		329,609
Other		22,899		7,127		302
Total (1)		$	1,261,084	$	1,271,847	$	1,198,343

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(In thousands)	December 31, 2020		December 31, 2019
Long-lived assets by geography:
United States	$	8,205,682	$	5,267,189
Europe	1,699,338		1,508,347
Other	624,680		—
Total (2)	$	10,529,700	$	6,775,536

__________

(1) Total income includes the Company's share of earnings (loss) from its equity method investments (but excludes the Company's impairment of its equity method investments of $512.2 million, $258.0 million and $61.2 million for the years ended December 31, 2020, 2019 and 2018, respectively); and excludes cost reimbursement income from affiliates (Note 20) and income from discontinued operations (Note 16). All income from discontinued operations is generated in the United States.

(2) Long-lived assets comprise real estate held for investment, lease related intangible assets, operating lease right-of-use assets and fixed assets, and exclude financial instruments, assets held for disposition and non-lease related intangible assets. Long-lived assets that are held for disposition at December 31, 2020 and 2019 included $3.7 billion and $5.2 billion located in the United States, respectively, and $0.2 billion and $0.3 billion located in Europe, respectively.

24. Supplemental Disclosure of Cash Flow Information


	Year Ended December 31,
(In thousands)	2020		2019		2018
Supplemental Disclosure of Cash Flow Information
Cash paid for interest, net of amounts capitalized of $852, $3,192, and $5,554	$	392,004	$	523,533	$	507,495
Cash paid for income taxes, net of refunds	39,151		(12,595)		14,476
Cash paid for operating lease liabilities	31,138		16,234		—
Cash paid for finance lease liabilities	889		—		—
Supplemental Disclosure of Cash Flows from Discontinued Operations
Hotel:
Net cash provided by (used in) operating activities of discontinued operations	$	8,682	$	157,709	$	177,835
Net cash provided by (used in) investing activities of discontinued operations	(88,348)		(102,845)		19,234
Net cash provided by (used in) financing activities of discontinued operations	(763)		(41,910)		(160,821)
Industrial:
Net cash provided by (used in) operating activities of discontinued operations	(32,452)		158,666		153,379
Net cash provided by (used in) investing activities of discontinued operations	431,972		(599,940)		82,408
Net cash provided by (used in) financing activities of discontinued operations	(359,113)		351,052		378,788

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	Year Ended December 31,
(In thousands)	2020		2019		2018
Supplemental Disclosure of Cash Flows from Investing and Financing Activities
Dividends and distributions payable	$	18,516	$	83,301	$	84,013
Improvements in operating real estate in accrued and other liabilities	27,096		20,230		2,249
Proceeds from loan repayments and asset sales held in escrow	1,858		63,984		19,425
Operating lease right-of-use assets and lease liabilities established	262,169		139,157		—
Finance lease right-of-use assets and lease liabilities established	148,974		—		—
Redemption of OP Units for common stock	7,757		2,104		29,034
Preferred stock redemptions payable	—		402,855		—

Assets and liabilities of investment entities deconsolidated in foreclosure	172,927		—		—
Assets consolidated in real estate acquisition and foreclosure, net of cash and restricted cash	5,399,611		—		—
Liabilities assumed in real estate acquisition and foreclosure	1,854,760		—		—
Noncontrolling interests assumed in real estate acquisition	366,136		—		—
Deferred cash consideration for acquisition of DBH (Note 3)	—		32,500		—
Issuance of OP Units for business combinations (Note 3)	—		114,865		—
Distributions payable to noncontrolling interests included in other liabilities	—		3,986		19,297
Foreclosures and exchanges of loans receivable for real estate	—		28,562		47,097
Debt assumed by buyer in sale of real estate	—		295,562		196,416
Financing provided to buyer in sale of real estate	—		4,000		—
Fair value of Digital Colony Manager contract intangible consolidated (Note 3)	—		51,400		—
Assets acquired in business combinations, net of cash and restricted cash acquired (Note 3)	—		2,098,313		—
Liabilities assumed in business combinations (Note 3)	—		818,449		—
Noncontrolling interests assumed in business combinations (Note 3)	—		724,567		—
Deconsolidation of net assets of securitization trusts	—		—		131,386
Assets held for sale contributed to equity method investee	—		—		20,350
Deferred tax liabilities assumed by buyer of related real estate	—		—		26,629
Share repurchase payable	—		—		7,567
Contributions receivable from noncontrolling interests	—		—		29,721
Assets of investment entities deconsolidated, net of cash and restricted cash contributed (1)	395,351		—		1,753,066
Liabilities of investment entities deconsolidated (1)	235,425		—		421,245
Noncontrolling interests of investment entities deconsolidated (1)	80,921		—		395,274

__________

(1) Represents sale of the Company's interest in the bulk industrial portfolio in 2020 (Note 8) and contribution of the CLNY Contributed Portfolio for the formation of CLNC in 2018 (Note 6).

25. Subsequent Events

Other than as disclosed elsewhere, no subsequent events have occurred that would require recognition in the

consolidated financial statements or disclosure in the accompanying notes.

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COLONY CAPITAL, INC.

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

Years Ended December 31, 2020, 2019 and 2018

The following table summarizes the activities in the allowance for doubtful accounts established on the Company's receivable balances, primarily on receivables from managed hotel properties in Europe. The allowance amounts presented below exclude those established on doubtful accounts related to assets held for disposition.

2018 included allowances established on lease-related receivables such as base rents, expense reimbursements and straight-line rents from tenants, and resident fees. Upon adoption of ASC 842 on January 1, 2019, such allowances were charged off against the receivable to the extent collection of the related lease receivables were determined to not be probable, and any remaining allowance related to amounts probable of collection were subsequently charged off at such time cash was collected as a reduction to bad debt expense.


	Year Ended December 31,
(In thousands)	2020		2019		2018
Balance at January 1	$	110	$	13,934	$	6,310
Cumulative effect of adoption of ASC 842	—		(13,889)		—
Allowance for doubtful accounts	1,094		3,969		26,416
Charge-offs	(313)		(3,904)		(18,732)
Effect of changes in foreign exchange rates	—		—		(60)
Balance at December 31	$	891	$	110	$	13,934

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COLONY CAPITAL, INC.

SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2020


(Amounts in thousands)				Initial Cost				Costs Capitalized		Impairment		Gross Cost Basis (2)						Accumulated Depreciation (3)		Net Carrying Amount (4)		Date of Acquisition or Construction
	Number of Properties	Encumbrances		Land		Buildings and Improvements (1)						Land		Buildings and Improvements (1)		Total

Digital Operating
Data Centers—Colocation (5)
Arizona	3	$	6,009	$	—	$	9,640	$	—	$	—	$	—	$	9,640	$	9,640	$	(34)	$	9,606	2020
California	6	94,433		10,574		140,918		—		—		10,574		140,918		151,492		(539)		150,953		2020
Colorado	4	71,949		3,397		112,026		—		—		3,397		112,026		115,423		(411)		115,012		2020
Florida	1	9,107		—		14,609		—		—		—		14,609		14,609		(52)		14,557		2020
Georgia	2	97,725		1,467		149,186		14,924		—		1,467		164,110		165,577		(5,016)		160,561		2019-2020
Illinois	4	86,916		—		139,432		—		—		—		139,432		139,432		(496)		138,936		2020
Indiana	2	13,076		—		19,747		4,190		—		—		23,937		23,937		(1,919)		22,018		2019
Kansas	3	45,306		1,336		78,769		1,120		—		1,336		79,889		81,225		(4,935)		76,290		2019
Maryland	1	9,724		—		16,002		1,813		—		—		17,815		17,815		(1,441)		16,374		2019
Massachusetts	1	3,779		—		6,062		—		—		—		6,062		6,062		(22)		6,040		2020
Minnesota	3	41,211		5,116		64,732		4,151		—		5,116		68,883		73,999		(4,970)		69,029		2019-2020
Nevada	1	15,426		—		24,746		—		—		—		24,746		24,746		(88)		24,658		2020
New Jersey	2	28,187		—		45,218		—		—		—		45,218		45,218		(161)		45,057		2020
New York	2	18,957		—		30,411		—		—		—		30,411		30,411		(108)		30,303		2020
Ohio	1	5,647		—		10,348		38		—		—		10,386		10,386		(877)		9,509		2019
Pennsylvania	3	50,671		1,555		79,574		9,642		—		1,555		89,216		90,771		(5,755)		85,016		2019-2020
Tennessee	1	2,726		—		4,373		—		—		—		4,373		4,373		(16)		4,357		2020
Texas	9	200,060		13,937		267,384		14,572		—		13,937		281,956		295,893		(14,268)		281,625		2019-2020
Utah	5	190,719		15,109		297,384		29,263		—		15,109		326,647		341,756		(20,610)		321,146		2019
Virginia	2	73,557		12,618		105,384		—		—		12,618		105,384		118,002		(420)		117,582		2020
Washington	2	9,416		—		15,106		—		—		—		15,106		15,106		(54)		15,052		2020
United Kingdom	1	19,390		—		31,106		—		—		—		31,106		31,106		(111)		30,995		2020
Data Centers—Hyperscale
California	7	1,456,627		95,116		1,792,066		—		—		95,116		1,792,066		1,887,182		(38,312)		1,848,870		2020
Washington	2	269,395		3,582		345,067		—		—		3,582		345,067		348,649		(6,711)		341,938		2020
Canada	3	406,830		4,337		522,902		—		—		4,337		522,902		527,239		(10,858)		516,381		2020
	71	3,226,843		168,144		4,322,192		79,713		—		168,144		4,401,905		4,570,049		(118,184)		4,451,865
Wellness Infrastructure
Assisted Living Facilities
Alabama	1	4,488		337		2,583		1,524		(2,705)		—		1,739		1,739		(603)		1,136		2017
Arizona	1	8,895		536		14,434		1,608		(5,630)		327		10,621		10,948		(1,876)		9,072		2017
California	2	16,215		2,977		32,983		1,504		(19,715)		1,735		16,014		17,749		(3,653)		14,096		2017
Colorado	2	101,909		7,734		138,276		5,260		(53,225)		4,777		93,268		98,045		(15,111)		82,934		2017
Illinois	6	122,111		6,959		152,507		13,611		(35,797)		5,159		132,121		137,280		(17,742)		119,538		2017

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(Amounts in thousands)			Initial Cost		Costs Capitalized	Impairment	Gross Cost Basis (2)			Accumulated Depreciation (3)	Net Carrying Amount (4)	Date of Acquisition or Construction
	Number of Properties	Encumbrances	Land	Buildings and Improvements (1)			Land	Buildings and Improvements (1)	Total

Indiana	9	25,835	7,170	26,900	—	—	7,170	26,900	34,070	(3,681)	30,389	2017
Massachusetts	1	2,930	1,346	1,523	360	—	1,346	1,883	3,229	(384)	2,845	2017
North Carolina	8	81,198	11,656	151,555	1,929	(43,805)	8,488	112,847	121,335	(15,880)	105,455	2017
Ohio	3	151,946	14,075	192,190	14,092	(57,287)	10,001	153,069	163,070	(22,143)	140,927	2017
Oregon	25	170,238	20,905	269,521	6,581	(45,497)	17,923	233,587	251,510	(30,998)	220,512	2017
South Carolina	1	15,997	1,105	17,975	2,377	(12,352)	367	8,738	9,105	(2,010)	7,095	2017
Tennessee	1	5,542	1,263	11,093	652	(7,261)	503	5,244	5,747	(1,245)	4,502	2017
Texas	7	114,648	17,890	135,599	8,775	(31,306)	14,309	116,649	130,958	(17,393)	113,565	2017
Washington	5	38,744	3,439	55,200	2,033	(5,553)	3,012	52,107	55,119	(6,347)	48,772	2017
United Kingdom	46	293,230	133,616	527,985	49,662	(4,616)	137,351	569,296	706,647	(60,245)	646,402	2017-2019
Hospitals
Georgia	1	9,005	2,047	16,650	—	—	2,047	16,650	18,697	(1,710)	16,987	2017
Louisiana	1	13,039	1,591	13,991	—	—	1,591	13,991	15,582	(1,425)	14,157	2017
Missouri	3	18,592	3,586	22,684	—	—	3,586	22,684	26,270	(2,417)	23,853	2017
Oklahoma	1	15,309	536	15,954	—	—	536	15,954	16,490	(1,621)	14,869	2017
Texas	2	18,393	3,191	52,140	2,670	(4,852)	3,002	50,147	53,149	(5,468)	47,681	2017
Utah	1	3,383	2,151	7,073	—	—	2,151	7,073	9,224	(747)	8,477	2017
Medical Office Buildings
Alabama	2	34,478	—	56,252	1,242	(23,532)	—	33,962	33,962	(5,093)	28,869	2017
Arkansas	1	807	—	1,343	—	—	—	1,343	1,343	(400)	943	2017
California	2	18,600	5,708	33,831	1,196	(13,916)	3,478	23,341	26,819	(4,357)	22,462	2017
Colorado	6	20,990	8,330	57,618	4,893	(42,661)	1,866	26,314	28,180	(7,789)	20,391	2017
Florida	3	23,182	2,119	41,279	1,962	(18,147)	1,131	26,082	27,213	(4,712)	22,501	2017
Georgia	13	60,989	12,976	100,152	5,465	(24,939)	9,912	83,742	93,654	(13,055)	80,599	2017
Hawaii	1	4,733	519	14,030	3,785	(9,451)	147	8,736	8,883	(1,419)	7,464	2017
Idaho	1	18,418	—	30,473	114	(7,339)	—	23,248	23,248	(3,352)	19,896	2017
Illinois	6	62,616	9,809	97,772	6,930	(37,890)	5,600	71,021	76,621	(11,966)	64,655	2017
Indiana	27	160,147	18,106	297,676	13,492	(92,899)	10,230	226,145	236,375	(37,987)	198,388	2017
Louisiana	4	25,576	2,406	52,142	323	(14,215)	1,573	39,083	40,656	(6,256)	34,400	2017
Michigan	3	29,850	3,856	48,703	2,817	(16,060)	2,104	37,212	39,316	(5,421)	33,895	2017
Minnesota	2	4,808	1,144	9,348	164	(4,454)	596	5,606	6,202	(1,136)	5,066	2017
Mississippi	1	13,720	—	21,465	—	—	—	21,465	21,465	(2,575)	18,890	2017
New Mexico	3	9,934	—	16,344	657	(1,934)	—	15,067	15,067	(3,574)	11,493	2017
Ohio	5	42,227	5,036	99,039	2,421	(40,298)	1,653	64,545	66,198	(11,047)	55,151	2017
Oklahoma	2	11,865	—	18,382	—	—	—	18,382	18,382	(2,225)	16,157	2017
South Carolina	2	14,925	761	22,966	1,860	(11,345)	343	13,899	14,242	(2,766)	11,476	2017
Tennessee	2	3,848	449	20,022	697	(14,393)	135	6,640	6,775	(2,025)	4,750	2017

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(Amounts in thousands)				Initial Cost				Costs Capitalized		Impairment		Gross Cost Basis (2)						Accumulated Depreciation (3)		Net Carrying Amount (4)		Date of Acquisition or Construction
	Number of Properties	Encumbrances		Land		Buildings and Improvements (1)						Land		Buildings and Improvements (1)		Total

Texas	19	92,948		5,808		168,060		4,536		(57,767)		3,974		116,663		120,637		(23,529)		97,108		2017
Washington	1	22,470		998		47,052		986		—		998		48,038		49,036		(5,301)		43,735		2017
Skilled Nursing Facilities
Alabama	1	8,412		433		7,169		—		—		433		7,169		7,602		(948)		6,654		2017
California	2	13,187		1,936		37,612		—		(7,411)		1,256		30,881		32,137		(9,014)		23,123		2017
Florida	11	78,560		12,835		145,970		—		(1,045)		12,802		144,958		157,760		(16,968)		140,792		2017
Georgia	6	99,766		12,140		130,707		—		—		12,140		130,707		142,847		(14,533)		128,314		2017
Illinois	2	8,980		2,716		15,941		—		(2,583)		2,257		13,817		16,074		(2,448)		13,626		2017
Indiana	19	95,295		5,634		132,921		—		—		5,634		132,921		138,555		(16,939)		121,616		2017
Kentucky	1	12,989		362		17,493		3,084		(2,189)		319		18,431		18,750		(2,479)		16,271		2017
Louisiana	1	26,245		1,068		28,675		—		—		1,068		28,675		29,743		(3,272)		26,471		2017
Massachusetts	3	9,506		6,179		8,006		—		—		6,179		8,006		14,185		(868)		13,317		2017
North Carolina	1	5,328		286		10,549		—		(1,446)		243		9,146		9,389		(1,223)		8,166		2017
Oregon	6	22,435		4,330		38,024		43		(6,359)		3,596		32,442		36,038		(4,178)		31,860		2017
Pennsylvania	8	209,376		20,010		240,922		—		(549)		19,461		240,922		260,383		(27,481)		232,902		2017
Tennessee	2	29,527		2,305		36,890		—		—		2,305		36,890		39,195		(4,107)		35,088		2017
Virginia	6	44,168		4,157		53,953		—		—		4,157		53,953		58,110		(6,342)		51,768		2017
Washington	3	10,348		3,647		16,108		152		(1,264)		3,426		15,217		18,643		(2,079)		16,564		2017
	305	2,582,900		400,173		4,033,705		169,457		(783,687)		344,397		3,475,251		3,819,648		(481,563)		3,338,085
Other Equity and Debt
Hotel—France	16	6,735		7,132		43,529		31		(3,411)		6,768		40,513		47,281		(1,419)		45,862		2017-2020
Hotel—Spain	1	—		—		2,514		786		(686)		—		2,614		2,614		(724)		1,890		2017
Mixed-Use—Italy	13	34,358		33,993		23,935		18,651		—		33,993		42,586		76,579		(2,439)		74,140		2015
Office—US	2	102,666		11,862		128,004		16,396		(58,208)		11,862		86,192		98,054		(28,515)		69,539		2013-2017
Office—France	19	55,689		32,324		70,100		18,993		(2,081)		32,324		87,012		119,336		(10,720)		108,616		2016-2017
Office—Ireland	4	100,106		60,404		44,184		—		—		60,404		44,184		104,588		(279)		104,309		2020
Office—Spain	2	114,969		102,878		95,127		7,189		(20,333)		102,878		81,983		184,861		(10,124)		174,737		2017
Office—UK	1	31,925		4		26,497		—		—		4		26,497		26,501		(166)		26,335		2020
Office/Industrial—France	161	248,140		74,144		250,118		4,861		(349)		74,144		254,630		328,774		(33,870)		294,904		2018
Retail—UK	1	25,680		—		74,587		151		(26,682)		—		48,056		48,056		(10,418)		37,638		2015
	220	720,268		322,741		758,595		67,058		(111,750)		322,377		714,267		1,036,644		(98,674)		937,970
Real estate held for investment	596	$	6,530,011	$	891,058	$	9,114,492	$	316,228	$	(895,437)	$	834,918	$	8,591,423	$	9,426,341	$	(698,421)	$	8,727,920

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(Amounts in thousands)

Initial Cost

Costs Capitalized

Impairment

Gross Cost Basis (2)

Accumulated Depreciation (3)

Net Carrying Amount
(4)

Date of Acquisition or Construction

Number of Properties

Encumbrances

Land

Buildings and Improvements (1)

Land

Buildings and Improvements (1)

Total

Real estate held for disposition

Wellness Infrastructure

162,952

2017

Hotel

2,602,451

2017

Other Equity & Debt

Various—US

901,797

Various

Various—Europe

235,769

Various

Total real estate

12,630,889

__________

(1) Includes construction in progress, data center infrastructure and furniture, fixtures and equipment.

(2) Presented net of impairment of real estate, as described in Note 4 to the consolidated financial statements.

(3) Depreciation is calculated using a useful life ranging from 1 year based on the shortest remaining lease term for improvements and up to 51 years for buildings.

(4) The aggregate gross cost of total real estate for federal income tax purposes was $13.0 billion at December 31, 2020.

(5) Includes 46 properties under leasehold interests for which the Company owns the data center infrastructure.

The following tables summarize the activity in real estate and accumulated depreciation:


	Year Ended December 31,
(In thousands)	2020		2019		2018
Real Estate, at Gross Cost Basis
Balance at January 1	$	12,702,355	$	15,500,802	$	15,791,144
Asset acquisitions and business combinations	3,650,180		2,351,196		984,844
Measurement period adjustments for real estate acquired in business combinations	(8,405)		—		—
Foreclosures and exchanges of loans receivable for real estate	124,335		14,866		45,617
Improvements and capitalized costs (1)	180,787		366,817		276,210
Deconsolidation of real estate held by investment entity upon closing of Combination	—		—		(226,004)
Dispositions (2)	(869,776)		(5,197,705)		(933,217)
Impairment (Note 4)	(1,878,012)		(348,710)		(357,629)
Effect of changes in foreign exchange rates	127,052		15,089		(80,163)
Balance at December 31	14,028,516		12,702,355		15,500,802
Classified as held for disposition, net (3)	(4,602,175)		(851,462)		(4,005,398)
Balance at December 31, held for investment	$	9,426,341	$	11,850,893	$	11,495,404

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	Year Ended December 31,
(In thousands)	2020		2019		2018
Accumulated Depreciation
Balance at January 1	$	1,042,422	$	1,029,386	$	606,200
Depreciation	420,209		500,240		471,599
Deconsolidation of real estate held by investment entity upon closing of Combination	—		—		(6,256)
Dispositions (2)	(74,692)		(489,276)		(42,873)
Effect of changes in foreign exchange rates	9,688		2,072		716
Balance at December 31	1,397,627		1,042,422		1,029,386
Classified as held for disposition, net (3)	(699,206)		(52,047)		(359,992)
Balance at December 31, held for investment	$	698,421	$	990,375	$	669,394

__________

(1) Includes transaction costs capitalized for asset acquisitions.

(2) Includes amounts classified as held for sale during the year and disposed before the end of the year.

(3) Amounts classified as held for sale during the year and remain as held for sale at the end of the year.

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COLONY CAPITAL, INC.

SCHEDULE IV—MORTGAGE LOANS ON REAL ESTATE

December 31, 2020


(Dollars in thousands)											Principal Amount Subject to Delinquent Principal or Interest (8)
Loan Type / Collateral / Location (1)	Number of Loans	Payment Terms (2)	Interest Rate Range (3)	Maturity Date Range (4)	Prior Liens (5)		Unpaid Principal Balance		Carrying Amount (6)(7)
Loans at fair value
First mortgage:
Hospitality—France	1	I/O	10.0%	December 2021	$	—	$	105,974	$	104,038	$	105,974
Hospitality—France	1	I/O	4.5%	(9)	—		1,299		1,350		1,299
Hospitality—Ireland	7	I/O	2.3% - 5.7%	Through November 2026 (9)	—		59,253		354		59,253
Hospitality—Spain	1	I/O	11.0%	(9)	—		45,656		43,160		45,656
Industrial—Ireland	3	I/O	2.1% - 3.7%	(9)	—		86,542		8,276		86,542
Land—Ireland	4	I/O	2.3% - 3.7%	(9)	—		114,767		25,209		114,767
Mixed Use—France	3	I/O	3.5% - 15.0%	(9)	—		7,895		6,137		7,895
Mixed Use—Ireland	38	I/O	1.5% - 13.8%	(9)	—		634,368		8,276		634,368
Multifamily—Ireland	1	I/O	2.8%	(9)	—		83,625		88,717		83,625
Multifamily—Ireland	2	I/O	2.2% - 2.7%	(9)	—		5,744		836		5,744
Office—Ireland	1	I/O	2.1%	(9)	—		181,079		193,532		181,079
Office—Ireland	1	I/O	2.0%	(9)	—		42,460		48,016		42,460
Office—Ireland	8	I/O	1.9% - 4.2%	Through September 2024 (9)	—		56,513		324		56,513
Retail—France	1	I/O	3.5%	(9)	—		3,111		3,233		3,111
Retail—Ireland	7	I/O	2.0% - 2.7%	(9)	—		106,074		16,779		106,074
Retail—USA	1	P&I	5.7%	(9)	—		37,766		—		37,766
Wellness Infrastructure—UK	1	I/O	7.5%	April 2024	—		43,007		47,232		43,007
	81				—		1,615,133		595,469		1,615,133
Subordinated mortgage and mezzanine:
Mixed Use—CA, USA	1	I/O	12.9%	July 2021	684,281		517,118		268,518		517,118
Office—Ireland / France	1	I/O	11.0%	January 2022	173,446		120,683		137,755		—
Office—Ireland	1	I/O	12.5%	December 2021	167,128		86,042		88,726		—
Office—USA	1	I/O	8.0%	April 2025	48,000		11,886		7,808		—
Retail—UK	1	I/O	1.0%	March 2024	122,741		66,885		53,597		—
	5				1,195,596		802,614		556,404		517,118
Corporate loans (10)
UK	2	I/O	8.0% - 14.0%	January 2025 to November 2025	—		128,846		129,177		—
USA	2	I/O	7.0% - 8.0%	October 2024 to January 2027	—		32,287		14,287		27,287
	4				—		161,133		143,464		27,287
Total	90				$	1,195,596	$	2,578,880	$	1,295,337	$	2,159,538

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__________

(1) Loans with carrying amounts that are individually less than 3% of the total carrying amount have been aggregated according to collateral type and location.

(2) Payment terms: P&I = Periodic payment of principal and interest; I/O = Periodic payment of interest only with principal at maturity

(3) Variable rate loans are determined based on the applicable index in effect at December 31, 2020.

(4) Represents contractual maturity and does not contemplate exercise of extension option.

(5) Prior liens represent loan amounts owned by third parties that are senior to the Company’s subordinated or mezzanine positions and are approximate.

(6) Carrying amount reflects fair value of loans, including interest receivable.

(7) The aggregate cost basis of loans held for investment for federal income tax purposes was $1.5 billion at December 31, 2020.

(8) Represents principal balance of loans which are 90 days or more past due as to principal or interest.

(9) Composed of loans with past due maturity. These are distressed loan portfolios previously acquired by the Company at a discount (classified as PCI loans prior to the election of fair value option).

(10) Corporate loans are either unsecured or secured by the assets of the parent entities that own the underlying real estate operations but are not secured by mortgages on the real estate.

Activity in loans held for investment for 2019 and 2018 is summarized below. Activity for 2020 after the election of the fair value option is summarized in Note 12 to the consolidated financial statements.


	Year Ended December 31,
(In thousands)	2019		2018
Balance at January 1	$	1,659,217	$	3,223,762
Loan acquisitions and originations	174,182		386,532
Paid-in-kind interest added to loan principal	68,810		52,234
Discount and net loan fee amortization	12,649		14,524
Accretion on PCI loans	19,637		27,911
Loan repayments	(216,891)		(166,267)
Payments received from PCI loans	(50,765)		(187,140)
Carrying value of loans sold	(35,158)		(111,864)
Foreclosures and other conversions to real estate	(28,562)		(47,097)
Loans receivable contributed to CLNC	—		(1,287,994)
Deconsolidation of loans receivable in securitization trusts	—		(149,447)
Provision for loan losses	(35,880)		(43,034)
Effect of changes in foreign exchange rates	(14,415)		(52,903)
Balance at December 31	$	1,552,824	$	1,659,217

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Item 16. Form 10-K Summary

None.

EXHIBIT INDEX


Exhibit Number						Description

2.1						Agreement and Plans of Merger, dated as of June 2, 2016, among NorthStar Asset Management Group Inc., Colony Capital, Inc., NorthStar Realty Finance Corp., Colony NorthStar, Inc. (formerly known as New Polaris Inc.), New Sirius Inc., NorthStar Realty Finance Limited Partnership, Sirius Merger Sub-T, LLC and New Sirius Merger Sub, LLC (incorporated by reference to Exhibit 2.1 to Colony NorthStar, Inc.’s Registration Statement on Form S-4 (No. 333-212739) effective November 18, 2016, which is included as Annex A to such Registration Statement)
2.2						Letter Agreement, dated as of July 28, 2016, by and among NorthStar Realty Finance Corp., Colony Capital, Inc., NorthStar Asset Management Group Inc., Colony NorthStar, Inc. (formerly known as New Polaris Inc.), Sirius Merger Sub-T, LLC, NorthStar Realty Finance Limited Partnership, New Sirius Inc. and New Sirius Merger Sub LLC (incorporated by reference to Exhibit 2.2 to Colony NorthStar, Inc.’s Registration Statement on Form S-4 (No. 333-212739) effective November 18, 2016, which is included as Annex A to such Registration Statement)
2.3						Letter Agreement, dated as of October 16, 2016, among NorthStar Realty Finance Corp., Colony Capital, Inc., NorthStar Asset Management Group Inc., Colony NorthStar, Inc. (formerly known as New Polaris Inc.), Sirius Merger Sub-T, LLC, NorthStar Realty Finance Limited Partnership, New Sirius Inc. and New Sirius Merger Sub LLC (incorporated by reference to Exhibit 2.3 to Colony NorthStar, Inc.’s Registration Statement on Form S-4 (No. 333-212739) effective November 18, 2016, which is included as Annex A to such Registration Statement)
3.1						Articles of Amendment and Restatement of Colony NorthStar, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on January 10, 2017)
3.2						Articles of Amendment of Colony Capital, Inc. (fka Colony NorthStar, Inc.), as amended (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q filed on August 9, 2018)
3.3						Amended and Restated Bylaws of Colony Capital, Inc. (fka Colony NorthStar, Inc.) (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on June 25, 2018)
3.4						Articles Supplementary designating Colony NorthStar, Inc.’s 7.15% Series I Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-A filed on June 5, 2017)
3.5						Articles Supplementary designating Colony NorthStar, Inc.’s 7.125% Series J Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share (incorporated by reference to Exhibit 3.3 to Colony NorthStar, Inc.’s Registration Statement on Form 8-A filed on September 22, 2017)
4.1						Form of stock certificate evidencing the 7.125% Series J Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form 8-A filed on September 22, 2017)
4.2						Form of stock certificate evidencing the 7.15% Series I Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $25.00 per share, par value $0.01 per share (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form 8-A filed on June 5, 2017)
4.3						Indenture, dated as of April 10, 2013, between Colony Capital, Inc. and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit 4.1 to Colony Financial, Inc.’s Current Report on Form 8-K filed on April 10, 2013)
4.4						First Supplemental Indenture, dated as of April 10, 2013, by and between Colony Capital, Inc. and The Bank of New York Mellon (incorporated by reference to Exhibit 4.2 to Colony Capital, Inc.’s Current Report on Form 8-K filed on April 10, 2013)
4.5						Third Supplemental Indenture, dated as of January 10, 2017, between Colony NorthStar, Inc. and The Bank of New York Mellon (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on January 10, 2017)
4.6						Registration Rights Agreement relating to the 5.375% Exchangeable Senior Notes due 2033 of NorthStar Realty Finance Limited Partnership, dated as of June 19, 2013 (incorporated by reference to Exhibit 4.4 to NorthStar Realty Finance Corp.’s Current Report on Form 8-K filed on June 19, 2013)
4.7						Indenture, dated as of June 19, 2013, by and among NorthStar Realty Finance Limited Partnership, NorthStar Realty Finance Corp., NRFC Sub-REIT Corp. and Wilmington Trust, National Association (incorporated by reference to Exhibit 4.1 to NorthStar Realty Finance Corp.’s Current Report on Form 8-K filed on June 19, 2013)
4.8						Supplemental Indenture, dated as of June 30, 2014, by and among NorthStar Realty Finance Corp., NRFC Sub-REIT Corp. and Wilmington Trust, National Association (incorporated by reference to Exhibit 4.3 to NorthStar Realty Finance Corp.’s Current Report on Form 8-K12B filed on July 1, 2014)
4.9						Second Supplemental Indenture, dated as of March 13, 2015, by and among NorthStar Realty Finance Corp., NorthStar Realty Finance Limited Partnership and Wilmington Trust, National Association (incorporated by reference to Exhibit 4.3 to NorthStar Realty Finance Corp.’s Current Report on Form 8-K filed on March 19, 2015)

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Exhibit Number						Description

4.10						Third Supplemental Indenture, dated as of January 10, 2017, by and between NRF Holdco, LLC, Colony NorthStar, Inc. and Wilmington Trust, National Association (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K12B filed on January 10, 2017)
4.11						Junior Subordinated Indenture, dated as of April 12, 2005, between NorthStar Realty Finance Corp. (as successor in interest to NorthStar Realty Finance Limited Partnership) and The Bank of New York Mellon Trust Company, N.A. (as successor trustee to JPMorgan Chase Bank, National Association) (incorporated by reference to Exhibit 10.17 to NorthStar Realty Finance Corp.’s Amendment No. 1 to its Annual Report on Form 10-K/A for the year ended December 31, 2004 (File No. 001-32330))
4.12						Supplemental Indenture dated as of June 30, 2014, by and among NorthStar Realty Finance Corp., NRFC Sub-REIT Corp. (renamed NorthStar Realty Finance Corp.) and The Bank of New York Mellon Trust Company, N.A. (incorporated by reference to Exhibit 4.12 to NorthStar Realty Finance Corp.’s Current Report on Form 8-K12B filed on July 1, 2014)
4.13						Second Supplemental Indenture, dated as of March 13, 2015, by and among NorthStar Realty Finance Corp., NorthStar Realty Finance Limited Partnership and The Bank of New York Mellon Trust Company, N.A., further supplementing the Indenture, dated as of April 12, 2005 and supplemented by the first Supplemental Indenture thereto dated as of June 30, 2014, between NorthStar Realty Finance Corp. and The Bank of New York Mellon Trust Company, N.A. (incorporated by reference to Exhibit 4.4 to NorthStar Realty Finance Corp.’s Current Report on Form 8-K filed on March 19, 2015)
4.14						Third Supplemental Indenture, dated as of January 10, 2017, by and among NRF Holdco, LLC, Colony NorthStar, Inc. and The Bank of New York Mellon Trust Company, N.A. (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K12B filed on January 10, 2017)
4.15						Junior Subordinated Indenture, dated as of May 25, 2005, between NorthStar Realty Finance Limited Partnership and The Bank of New York Mellon Trust Company, N.A. (as successor trustee to JPMorgan Chase Bank, National Association) (incorporated by reference to Exhibit 10.19 to NorthStar Realty Finance Corp.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 (File No. 001‑32330))
4.16						Supplemental Indenture dated as of June 30, 2014, by and among NorthStar Realty Finance Corp., NRFC Sub-REIT Corp. (renamed NorthStar Realty Finance Corp.) and The Bank of New York Mellon Trust Company, N.A. (incorporated by reference to Exhibit 4.14 to NorthStar Realty Finance Corp.’s Current Report on Form 8-K12B filed on July 1, 2014)
4.17						Second Supplemental Indenture, dated as of March 13, 2015, by and among NorthStar Realty Finance Corp., NorthStar Realty Finance Limited Partnership and The Bank of New York Mellon Trust Company, N.A., further supplementing the Indenture, dated as of May 25, 2005 and supplemented by the first Supplemental Indenture thereto dated as of June 30, 2014, between NorthStar Realty Finance Corp. and The Bank of New York Mellon Trust Company, N.A. (incorporated by reference to Exhibit 4.5 to NorthStar Realty Finance Corp.’s Current Report on Form 8-K filed on March 19, 2015)
4.18						Third Supplemental Indenture, dated as of January 10, 2017, by and among NRF Holdco, LLC, Colony NorthStar, Inc. and The Bank of New York Mellon Trust Company, N.A. (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K12B filed on January 10, 2017)
4.19						Junior Subordinated Indenture, dated as of November 22, 2005, between NorthStar Realty Finance Corp. (as successor in interest to NorthStar Realty Finance Limited Partnership) and The Bank of New York Mellon Trust Company, N.A. (as successor trustee to JPMorgan Chase Bank, National Association) (incorporated by reference to Exhibit 10.30 to NorthStar Realty Finance Corp.’s Registration Statement on Form S-11 (File No. 333-128962))
4.20						Supplemental Indenture dated as of June 30, 2014, by and among NorthStar Realty Finance Corp., NRFC Sub-REIT Corp. (renamed NorthStar Realty Finance Corp.) and The Bank of New York Mellon Trust Company, N.A. (incorporated by reference to Exhibit 4.16 to NorthStar Realty Finance Corp.’s Current Report on Form 8-K12B filed on July 1, 2014)
4.21						Second Supplemental Indenture, dated as of March 13, 2015, by and among NorthStar Realty Finance Corp., NorthStar Realty Finance Limited Partnership and The Bank of New York Mellon Trust Company, N.A., further supplementing the Indenture, dated as of November 22, 2005 and supplemented by the first Supplemental Indenture thereto dated as of June 30, 2014, between NorthStar Realty Finance Corp. and The Bank of New York Mellon Trust Company, N.A. (as successor trustee to JPMorgan Chase Bank, National Association) (incorporated by reference to Exhibit 4.6 to NorthStar Realty Finance Corp.’s Current Report on Form 8-K filed on March 19, 2015)
4.22						Third Supplemental Indenture, dated as of January 10, 2017, by and among NRF Holdco, LLC, Colony NorthStar, Inc. and The Bank of New York Mellon Trust Company, N.A. (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K12B filed on January 10, 2017)
4.23						Junior Subordinated Indenture, dated as of March 10, 2006, between NorthStar Realty Finance Corp. (as successor in interest to NorthStar Realty Finance Limited Partnership and NorthStar Realty Finance Corp.) and Wilmington Trust Company, as trustee (incorporated by reference to Exhibit 10.31 to NorthStar Realty Finance Corp.’s Annual Report on Form 10-K for the year ended December 31, 2005 (File No. 001-32330))

Table of Contents


Exhibit Number						Description

4.24						Supplemental Indenture dated as of June 30, 2014, by and among NorthStar Realty Finance Corp., NRFC Sub-REIT Corp. (renamed NorthStar Realty Finance Corp.) and Wilmington Trust Company (incorporated by reference to Exhibit 4.18 to NorthStar Realty Finance Corp.’s Current Report on Form 8-K12B filed on July 1, 2014)
4.25						Second Supplemental Indenture, dated as of March 13, 2015, by and among NorthStar Realty Finance Corp., NorthStar Realty Finance Limited Partnership and Wilmington Trust Company, further supplementing the Indenture, dated as of March 10, 2006 and supplemented by the first Supplemental Indenture thereto dated as of June 30, 2014, between NorthStar Realty Finance Corp. and Wilmington Trust Company (incorporated by reference to Exhibit 4.7 to NorthStar Realty Finance Corp.’s Current Report on Form 8-K filed on March 19, 2015)
4.26						Third Supplemental Indenture, dated as of January 10, 2017, by and among NRF Holdco, LLC, Colony NorthStar, Inc. and Wilmington Trust Company (incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K12B filed on January 10, 2017)
4.27						Junior Subordinated Indenture, dated as of August 1, 2006, between NorthStar Realty Finance Corp. (as successor in interest to NorthStar Realty Finance Limited Partnership and NorthStar Realty Finance Corp.) and Wilmington Trust Company, as trustee (incorporated by reference to Exhibit 10.39 to NorthStar Realty Finance Corp.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 (File No. 001-32330))
4.28						Supplemental Indenture dated as of June 30, 2014, by and among NorthStar Realty Finance Corp., NRFC Sub-REIT Corp. (renamed NorthStar Realty Finance Corp.) and Wilmington Trust Company (incorporated by reference to Exhibit 4.20 to NorthStar Realty Finance Corp.’s Current Report on Form 8-K12B filed on July 1, 2014)
4.29						Second Supplemental Indenture, dated as of March 13, 2015, by and among NorthStar Realty Finance Corp., NorthStar Realty Finance Limited Partnership and Wilmington Trust Company, further supplementing the Indenture, dated as of August 1, 2006 and supplemented by the first Supplemental Indenture thereto dated as of June 30, 2014, between NorthStar Realty Finance Corp. and Wilmington Trust Company (incorporated by reference to Exhibit 4.8 to NorthStar Realty Finance Corp.’s Current Report on Form 8-K filed on March 19, 2015)
4.30						Third Supplemental Indenture, dated as of January 10, 2017, by and among NRF Holdco, LLC, Colony NorthStar, Inc. and Wilmington Trust Company (incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K12B filed on January 10, 2017)
4.31						Junior Subordinated Indenture, dated as of October 6, 2006, between NorthStar Realty Finance Corp. (as successor in interest to NorthStar Realty Finance Limited Partnership and NorthStar Realty Finance Corp.) and Wilmington Trust Company, as trustee (incorporated by reference to Exhibit 10.42 to NorthStar Realty Finance Corp.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (File No. 001-32330))
4.32						Supplemental Indenture dated as of June 30, 2014, by and among NorthStar Realty Finance Corp., NRFC Sub-REIT Corp. (renamed NorthStar Realty Finance Corp.) and Wilmington Trust Company (incorporated by reference to Exhibit 4.22 to NorthStar Realty Finance Corp.’s Current Report on Form 8-K12B filed on July 1, 2014)
4.33						Second Supplemental Indenture, dated as of March 13, 2015, by and among NorthStar Realty Finance Corp., NorthStar Realty Finance Limited Partnership and Wilmington Trust Company, further supplementing the Indenture, dated as of October 6, 2006 and supplemented by the first Supplemental Indenture thereto dated as of June 30, 2014, between NorthStar Realty Finance Corp. and Wilmington Trust Company (incorporated by reference to Exhibit 4.9 to NorthStar Realty Finance Corp.’s Current Report on Form 8-K filed on March 19, 2015)
4.34						Third Supplemental Indenture, dated as of January 10, 2017, by and among NRF Holdco, LLC, Colony NorthStar, Inc. and Wilmington Trust Company (incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K12B filed on January 10, 2017)
4.35						Junior Subordinated Indenture, dated as of March 30, 2007, between NorthStar Realty Finance Corp. (as successor in interest to NorthStar Realty Finance Limited Partnership and NorthStar Realty Finance Corp.) and Wilmington Trust Company, as trustee (incorporated by reference to Exhibit 10.46 to NorthStar Realty Finance Corp.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 (File No. 001-32330))
4.36						Supplemental Indenture dated as of June 30, 2014, by and among NorthStar Realty Finance Corp., NRFC Sub-REIT Corp. (renamed NorthStar Realty Finance Corp.) and Wilmington Trust Company (incorporated by reference to Exhibit 4.24 to NorthStar Realty Finance Corp.’s Current Report on Form 8-K12B filed on July 1, 2014)
4.37						Second Supplemental Indenture, dated as of March 13, 2015, by and among NorthStar Realty Finance Corp., NorthStar Realty Finance Limited Partnership and Wilmington Trust Company, further supplementing the Indenture, dated as of March 30, 2007 and supplemented by the first Supplemental Indenture thereto dated as of June 30, 2014, between NorthStar Realty Finance Corp. and Wilmington Trust Company (incorporated by reference to Exhibit 4.10 to NorthStar Realty Finance Corp.’s Current Report on Form 8-K filed on March 19, 2015)
4.38						Third Supplemental Indenture, dated as of January 10, 2017, by and among NRF Holdco, LLC, Colony NorthStar, Inc. and Wilmington Trust Company (incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K12B filed on January 10, 2017)

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Exhibit Number						Description

4.39						Junior Subordinated Indenture, dated as of June 7, 2007, between NorthStar Realty Finance Corporation (as successor in interest to NorthStar Realty Finance Limited Partnership and NorthStar Realty Finance Corp.) and Wilmington Trust Company, as trustee (incorporated by reference to Exhibit 10.52 to NorthStar Realty Finance Corp.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 (File No. 001-32330))
4.40						Supplemental Indenture dated as of June 30, 2014, by and among NorthStar Realty Finance Corp., NRFC Sub-REIT Corp. (renamed NorthStar Realty Finance Corp.) and Wilmington Trust Company (incorporated by reference to Exhibit 4.26 to NorthStar Realty Finance Corp.’s Current Report on Form 8-K12B filed on July 1, 2014)
4.41						Second Supplemental Indenture, dated as of March 13, 2015, by and among NorthStar Realty Finance Corp., NorthStar Realty Finance Limited Partnership and Wilmington Trust Company, further supplementing the Indenture, dated as of June 7, 2007 and supplemented by the first Supplemental Indenture thereto dated as of June 30, 2014, between NorthStar Realty Finance Corp. and Wilmington Trust Company (incorporated by reference to Exhibit 4.11 to NorthStar Realty Finance Corp.’s Current Report on Form 8-K filed on March 19, 2015)
4.42						Third Supplemental Indenture, dated as of January 10, 2017, by and among NRF Holdco, LLC, Colony NorthStar, Inc. and Wilmington Trust Company (incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K12B filed on January 10, 2017)
4.43*						Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934
4.44						Form of Class A Common Stock Purchase Warrant of Colony Capital, Inc. (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on July 23, 2020)
4.45						Indenture, dated as of July 21, 2020, among Colony Capital Operating Company, LLC, Colony Capital, Inc. and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on July 23, 2020)
4.46						Form of 5.75% Exchangeable Senior Notes due 2025 (included in Exhibit 4.45 )
4.47						Registration Rights Agreement, dated as of July 21, 2020, by and among Colony Capital Operating Company, LLC, Colony Capital, Inc. and the initial purchasers party thereto (incorporated by reference to Exhibit 10.7 to the Company's Current Report on Form 8-K filed on July 23, 2020)
Certain Instruments defining the rights of holders of long-term debt securities of the Registrant and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. The Registrant hereby undertakes to furnish to the SEC, upon request, copies of any such instruments.
10.1						Third Amended and Restated Limited Liability Company Agreement of Colony Capital Operating Company, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 10, 2017)
10.2						Amendment No. 1 to the Third Amended and Restated Limited Liability Company Agreement of Colony Capital Operating Company, LLC, dated as of June 23, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on August 9, 2017)
10.3						Amendment No. 2 to the Third Amended and Restated Limited Liability Company Agreement of Colony Capital Operating Company, LLC, dated as of October 13, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on November 9, 2017)
10.4						Amendment No. 3 to the Third Amended and Restated Limited Liability Company Agreement of Colony Capital Operating Company, LLC, dated as of October 18, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on November 9, 2017)
10.5						Amendment No. 4 to the Third Amended and Restated Limited Liability Company Agreement of Colony Capital Operating Company, LLC, dated as of November 5, 2018 (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed on November 9, 2018)
10.6†						Colony Capital, Inc. 2014 Omnibus Stock Incentive Plan (incorporated by reference to Exhibit 10.6 to the Company's Annual Report on Form 10-K filed on March 1, 2019)
10.7						Second Amended and Restated Credit Agreement, dated as of January 10, 2017, among Colony Capital Operating Company, LLC, the several lenders from time to time parties thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-K filed on January 10, 2017)
10.8						First Amendment to the Second Amended and Restated Credit Agreement, dated as of January 12, 2018, among Colony Capital Operating Company, LLC, the several lenders from time to time parties thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 19, 2018)
10.9						Second Amendment, dated as of January 8, 2019, among Colony Capital Operating Company, LLC, the several lenders from time to time parties thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K filed on March 1, 2019)

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Exhibit Number						Description

10.10						Third Amendment, dated as of April 5, 2019, among Colony Capital Operating Company, LLC, the Subsidiary Borrowers from time to time party thereto, the several lenders from time to time parties thereto and JPMorgan ChaseBank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 11, 2019)
10.11						Tax Protection Agreement, dated as of January 10, 2017, by and among Colony Capital, Inc., Colony Capital Operating Company, LLC, Colony Capital, LLC, CCH Management Partners I, LLC, FHB Holding LLC and Richard B. Saltzman (incorporated by reference to Exhibit 10.14 to the Company’s Current Report on Form 8-K12B filed on January 10, 2017)
10.12						Form of Indemnification Agreement, by and between Colony NorthStar, Inc. and the Officers and Directors of Colony NorthStar, Inc. (incorporated by reference to Exhibit 10.17 to the Company’s Current Report on Form 8-K12B filed on January 10, 2017)
10.13						Advisory Agreement, dated as of June 30, 2014, by and among NSAM J-NSHC Ltd, NorthStar Healthcare Income, Inc., NorthStar Healthcare Income Operating Partnership, LP and NorthStar Asset Management Group Inc. (incorporated by reference to Exhibit 10.8 to NorthStar Asset Management Group Inc.’s Current Report on Form 8-K filed on July 1, 2014)
10.14						Amendment No. 1 to Advisory Agreement, dated as of December 20, 2017, by and among NorthStar Healthcare Income, Inc., NorthStar Healthcare Income Operating Partnership, LP, CNI NSHC Advisors, LLC and Colony NorthStar, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 27, 2017)
10.15						Colony Mark Transfer Agreement, dated as of December 23, 2014, by and among New Colony Holdings LLC, Colony Financial, Inc. and CFI RE Masterco, LLC (incorporated by reference to Exhibit 10.1 to Colony Capital, Inc.’s Current Report on Form 8-K filed on December 23, 2014)
10.16†						Employment Agreement, dated as of December 23, 2014, by and between Colony Financial, Inc. and Thomas J. Barrack, Jr. (incorporated by reference to Exhibit 10.2 to Colony Capital, Inc.’s Current Report on Form 8-K filed on December 23, 2014)
10.17†						Share Transfer and Liquidated Damages Agreement, dated as of December 23, 2014, by and among Colony Financial, Inc., Colony Capital Holdings, LLC, Colony Capital, LLC and Richard B. Saltzman (incorporated by reference to Exhibit 10.5 to Colony Capital, Inc.’s Current Report on Form 8-K filed on December 23, 2014)
10.18†						Second Amendment to Employment Agreement and Restrictive Covenant Agreement, dated March 1, 2019, by and among the Company and Thomas J. Barrack, Jr. (incorporated by reference to Exhibit 10.1 to Colony Capital, Inc.'s Quarterly Report on Form 10-Q filed on May 10, 2019)
10.19†						Lock-Up and Liquidated Damages Agreement, dated as of December 23, 2014, by and among Colony Financial, Inc., CFI RE Masterco, LLC, Colony Capital, LLC and Thomas J. Barrack, Jr. (incorporated by reference to Exhibit 10.4 to Colony Capital, Inc.’s Current Report on Form 8-K filed on December 23, 2014)
10.20†						First Amendment to Employment Agreement, Lock-Up Agreement and Restrictive Covenant Agreement, dated as of June 2, 2016, by and among Colony and Thomas J. Barrack, Jr. (incorporated by reference to Exhibit 10.2 to Colony Capital, Inc.’s Current Report on Form 8-K filed on June 8, 2016)
10.21						Waiver and Acknowledgment to Contribution and Implementation Agreement, entered into as of April 1, 2015 (incorporated by reference to Exhibit 10.2 to Colony Capital, Inc.’s Current Report on Form 8-K filed on April 2, 2015)
10.22†						Employment Agreement, dated as of March 16, 2015, by and between Colony Capital, Inc. and Ronald M. Sanders (incorporated by reference to Exhibit 10.3 to Colony Capital, Inc.’s Current Report on Form 8-K filed on April 2, 2015)
10.23†						Employment Agreement, dated as of July 25, 2019, between Colony Capital, Inc. and Marc Ganzi (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on July 30, 2019)
10.24†						Form of Restricted Stock Agreemen t (incorporated by reference to Exhibit 10.30 to the Company's Annual Report on Form 10-K filed on March 1, 2019)
10.25†						Form of Performance Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.31 to the Company's Annual Report on Form 10-K filed on March 1, 2019)
10.26						Purchase and Sale Agreement, dated as of November 4, 2016, by and among NorthStar Realty Finance Limited Partnership, NorthStar Healthcare JV Holdings, LLC, NorthStar Healthcare REIT, LLC, NorthStar TK Healthcare Operating Company, LLC, NorthStar Healthcare JV, LLC and NRFC Healthcare Holding Company, LLC and Derwood Limited (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 25, 2017)
10.27						Amended and Restated Management Agreement, dated as of November 6, 2019, by and among Colony Credit Real Estate, Inc., Credit RE Operating Company, LLC and CLNC Manager, LLC (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q filed on November 8, 2019)
10.28						Stockholders Agreement, dated as of January 31, 2018, by and between Colony NorthStar Credit Real Estate, Inc. and Colony Capital Operating Company, LLC (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on February 1, 2018)

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Exhibit Number						Description

10.29						Registration Rights Agreement, dated as of January 31, 2018, by and among Colony NorthStar Credit Real Estate, Inc., Colony Capital Operating Company, LLC and NRF RED REIT Corp. (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on February 1, 2018)
10.30						Amended and Restated Aircraft Time Sharing Agreement, dated as of January 16, 2019, by and among Colony Capital Advisors, LLC and Thomas J. Barrack, Jr. (incorporated by reference to Exhibit 10.41 to the Company's Annual Report on Form 10-K filed on March 1, 2019)
10.31						Investment Agreement, dated as of July 7, 2020, by and among Colony Valhalla Partners I-A Holdings, L.P., a Delaware limited partnership, Colony Valhalla Partners I-B Holdings, L.P., a Delaware limited partnership, Colony Valhalla Partners II Holdings, L.P., a Delaware limited partnership, CBRE Caledon Valhalla Aggregator Holdings LP, a Delaware limited partnership and Vantage Data Centers Holdings, LLC, a Delaware limited liability company (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on July 13, 2020)
10.32						Investment Agreement, dated as of July 17, 2020, by and among W-Catalina (S) LLC, Colony Capital Operating Company, LLC, Colony Capital, Inc. (for the limited purposes set forth therein) and the Initial Wafra Representative (as defined therein) (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020) ***
10.33						Carry Investment Agreement, dated as of July 17, 2020, by and among W-Catalina (C) LLC, Colony Capital Operating Company, LLC, Colony DCP (CI) Bermuda, LP, a Bermuda limited partnership, Colony DCP (CI) GP, LLC (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on July 23, 2020) ***
10.34						Investor Rights Agreement, dated as of July 17, 2020, by and among Colony Capital, Inc., Colony Capital Operating Company, LLC, Colony Capital Digital Holdco, LLC, Colony DC Manager, LLC and W-Catalina (S) LLC (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on July 23, 2020) ***
10.35						Carried Interest Participation Agreement, dated as of July 17, 2020, by and among Colony DCP (CI) Bermuda, LP, Colony DCP (CI) GP, LLC, Colony Capital, Inc., Colony Capital Operating Company, LLC, W-Catalina (S) LLC and W-Catalina (C) LLC (incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed on July 23, 2020) ***
10.36						Amended and Restated Restrictive Covenant Agreement, dated as of July 17, 2020, by and between Colony Capital, Inc. and Marc Ganzi (incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed on July 23, 2020)
10.37						Acknowledgment Letter, dated as of July 17, 2020, by and among Marc Ganzi, W-Catalina (S) LLC, W-Catalina (C) LLC and Colony Capital, Inc. (incorporated by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed on July 23, 2020)
10.38						Joinder and Amendment to Letter Agreement, dated as of July 22, 2020, by and among Digital Bridge Holdings, LLC, CC Valhalla Investor, LLC, Marc Ganzi, Benjamin Jenkins and the other parties named therein (incorporated by reference to Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020)
10.39						Assignment and Contribution Agreement, dated as of July 22, 2020, by and among Marc Ganzi, Benjamin Jenkins, MCG Analog, LLC, the Ganzi Extended Family Trust, BJJ Analog, LLC, DB Aviator Manager Rollover Holdings, L.P., DCR YieldCo Holdings, LP and DCR and Aviator Holdings GP, LLC (incorporated by reference to Exhibit 10.12 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020)
10.40						Amended and Restated Partnership Agreement of DB Aviator Manager Rollover Holdings, L.P., dated as of July 22, 2020, by and among Colony Valhalla GP, LLC, Colony Capital Acquisitions, LLC, MCG Analog, LLC, Ganzi Extended Family Trust, BJJ Analog, LLC and Valhalla Management Holdings, LLC (incorporated by reference to Exhibit 10.13 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020)
10.41						Agreement of Purchase and Sale , dated as of September 22, 2020, between the CLNY Seller Entities (as named therein) and Silverplate Capital Partners LLC (incorporated by reference to Exhibit 10.13 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020)
10.42						First Amendment to Agreement of Purchase and Sale , dated as of October 9, 2020, between the CLNY Seller Entities (as named therein) and Silverplate Capital Partners LLC (incorporated by reference to Exhibit 10.13 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020)
10.43						Amendment No.2 to Advisory Agreement dated as of June 22, 2020 by and among NorthStar Healthcare Income, Inc., NorthStar Healthcare Income Operating Partnership, LP, CNI NSHC Advisors, LLC and Colony Capital, Inc. (f/k/a Colony Northstar, Inc.) (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020)
10.44						Fourth Amendment, dated as of June 29, 2020, to the Second Amended and Restated Credit Agreement dated as of January 10, 2017 among Colony Capital Operating Company, LLC, the Subsidiary Borrowers from time to time party thereto, the several lenders from time to time parties thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 1, 2020)
10.45*						Fifth Amendment, dated as of December 9, 2020, to the Second Amended and Restated Credit Agreement dated as of January 10, 2017 among Colony Capital Operating Company, LLC, the Subsidiary Borrowers from time to time party thereto, the several lenders from time to time parties thereto and JPMorgan Chase Bank, N.A., as administrative agent

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Exhibit Number						Description

10.46†						Separation Agreement, dated as of April 1, 2020, by and between Colony Capital, Inc. and Darren J. Tangen (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 30, 2020)
10.47†						Separation Agreement, dated as of February 26, 2020, by and between Colony Capital, Inc. and Kevin Traenkle (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 30, 2020)
10.48						Cooperation Agreement, dated as of March 19, 2020, by and among Colony Capital, Inc., Jason Aintabi and Blackwells Capital LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 2 5, 2020)
10.49						Limited Liability Company Agreement of CBW 2020, LLC, dated as of March 19, 2020, by and between CBW MM 2020, L L C and Blackwells Capital LLC (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 25, 2020)
10.50†						Employment Agreement, dated as of March 11, 2020, by and between Colony Capital, Inc. and Jacky Wu (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 16, 2020)
10.51†*						Amended and Restated Employment Agreement, dated as of December 30 , 2020, between Colony Capital, Inc. and Neale W. Redington
10.52†*						Offer Letter, dated as of December 18, 2020, by and between Colony Capital, Inc. and Sonia Kim
10.53†*						Separation and Release Agreement, dated as of November 5, 2020, by and between Colony Capital, Inc. and Mark M. Hedstrom
10.54†*						Consulting Agreement, dated as of November 5, 2020, by and between Colony Capital, Inc. and Mark M. Hedstrom
10.55*						Second Amendment to Agreement of Purchase and Sale, dated as of February 28 , 202 1 , between the CLNY Seller Entities (as named therein) and Silverplate Capital Partners LLC
21.1*						List of Subsidiaries of Colony Capital, Inc.
23.1*						Consent of Ernst & Young LLP
31.1*						Certification of Marc C. Ganzi, Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*						Certification of Jacky Wu, Chief Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*						Certification of Marc C. Ganzi, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*						Certification of Jacky Wu, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS**						XBRL Instance Document
101.SCH						Inline XBRL Taxonomy Extension Schema
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase
104**						Cover Page Interactive Data File

__________

† Denotes a management contract or compensatory plan contract or arrangement.

* Filed herewith.

** The document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

*** Schedules and exhibits to such agreement have been omitted from this filing pursuant to Item 601(a)(5) of Regulation S-K. The Registrant will furnish copies of such schedules and exhibits to the SEC upon request.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: March 1, 2021


COLONY CAPITAL, INC.

By:						/s/ Marc C. Ganzi
						Marc C. Ganzi
						Chief Executive Officer and President (Principal Executive Officer)

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POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jacky Wu and Ronald M. Sanders and each of them severally, her or his true and lawful attorney-in-fact with power of substitution and re-substitution to sign in her or his name, place and stead, in any and all capacities, to do any and all things and execute any and all instruments that such attorney may deem necessary or advisable under the Securities Exchange Act of 1934 and any rules, regulations and requirements of the U.S. Securities and Exchange Commission in connection with this Annual Report on Form 10-K and any and all amendments hereto, as fully for all intents and purposes as she or he might or could do in person, and hereby ratifies and confirms all said attorneys-in-fact and agents, each acting alone, and her or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below on behalf of the Registrant in the capacities and on the dates indicated.

Signature

Title

Date

/s/ Thomas J. Barrack, Jr.

Executive Chairman of Board of Directors

March 1, 2021

Thomas J. Barrack, Jr.

/s/ Marc C. Ganzi

Chief Executive Officer and President and Director (Principal Executive Officer)

March 1, 2021

Marc C. Ganzi

/s/ Jacky Wu

Chief Financial Officer (Principal Financial Officer)

March 1, 2021

Jacky Wu

/s/ Sonia Kim

Chief Accounting Officer (Principal Accounting Officer)

March 1, 2021

Sonia Kim

/s/ Nancy A. Curtin

Director

March 1, 2021

Nancy A. Curtin

/s/ Jeannie H. Diefenderfer

Director

March 1, 2021

Jeannie H. Diefenderfer

/s/ Jon A. Fosheim

Director

March 1, 2021

Jon A. Fosheim

/s/ Craig M. Hatkoff

Director

March 1, 2021

Craig M. Hatkoff

/s/ Gregory J. McCray

Director

March 1, 2021

Gregory J. McCray

/s/ Raymond C. Mikulich

Director

March 1, 2021

Raymond C. Mikulich

/s/ George G.C. Parker

Director

March 1, 2021

George G.C. Parker

/s/ Dale Anne Reiss

Director

March 1, 2021

Dale Anne Reiss

/s/ John L. Steffens

Director

March 1, 2021

John L. Steffens